This post is also available in: 
Français
Hedge fund momentum continued in September. The
sharp move in the markets occurred early in the month as the
ECB’s plan for unlimited bond purchases came into focus. For
the remainder of the month, markets were relatively calm and
exhibited low correlations among individual securities. Volatility
was low, as markets did not lurch erratically from euphoria to
fear. Fundamentals generally overrode emotions, meaning that
some risk assets rose in value (e.g., equities and corporate
bonds) and some fell (e.g., agricultural commodities and crude
oil). This environment benefited nearly all hedge funds
strategies, with the exception of CTAs, which often act as the
de-correlated portfolio diversifier.
Credit-oriented funds chalked up another positive month to
make it four in a row. The Lyxor L/S Credit Index gained 1.2%
in September, yielding a 6.4% gain for 2012 so far. The index
has gone up in eight of the past nine months. The choice of
“shorts” in Long/Short is becoming more crucial as spreads
are generally tighter than they have been in over a year. Even
though credit spreads have not moved in a straight line this
year, L/S Credit funds have exhibited remarkable persistence
in navigating the environment and managing exposures.
Equity-oriented hedge fund managers also found continued
traction. The Lyxor L/S Equity – Long Bias Index gained 1.5%
for a year-to-date performance of 8.7% (the best performance
of any of the strategy indices). The index has now gained for
four consecutive months. The L/S Equity Variable Bias
managers displayed more mixed performance, with the Index
gaining a more modest 0.4%. Managers had increased
exposures as the summer equity rally gained steam but have taken them down a bit as the rally has faded. The Market
Neutral Index declined 1.4% and the Statistical Arbitrage Index
gained a solid 0.6% (+4.2% on the year).
Event Driven managers performed solidly as both equity and
credit markets provided opportunities. The Special Situations
Index gained 2.2% with good performance by most managers
in that space. Outperformers often exhibited heavy exposure
to gold or gold miners. The Merger Arbitrage Index continued
its positive trajectory with a 0.1% gain. The Distressed Index
posted 0.4% gains (up 5.7% year-to-date); the Index has
gained every month this year but one.
Global Macro funds extended their summer rebound, with
commodity and foreign exchange market moves providing the
differentiation among funds. The few managers who were long
euro or short agricultural commodities easily bested their
peers. The Index gained 0.3%. Fixed Income Arbitrage and
Convertible Arbitrage gained 0.9% and 0.5%, respectively.
The Fixed Income Arbitrage Index now stands at +8.2% on the
year, the second highest return for a Lyxor Strategy Index.
CTAs, both short term and trend followers, posted negative
returns this month, respectively -2.3% for the Long Term CTA
Index and -1.0% for the Short Term CTA Index. While trendfollowing
CTAs gained on generally rising equity markets
(which they were long), they also suffered losses on long
positions in agricultural commodities, energy, and the US
dollar. The rise and subsequent decline of U.S. Treasury yields
meant that the persistent long bond positioning of CTAs did
not particularly benefit or detract from performance.
“Hedge fund managers had a hesitant if not cautious view on
Europe which led to low directionality and leverage in portfolios.
That has started to be adjusted upwards during September” says
Stefan Keller, Head of Managed Account Platform Research &
External Relations at Lyxor AM.
Add Comment