{"id":32732,"date":"2014-02-10T01:02:53","date_gmt":"2014-02-10T00:02:53","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/hedge-funds-unscathed-from-rising-doubts-on-emerging-global-growth-and-central-banks\/"},"modified":"2014-02-10T01:02:53","modified_gmt":"2014-02-10T00:02:53","slug":"hedge-funds-unscathed-from-rising-doubts-on-emerging-global-growth-and-central-banks","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/hedge-funds-unscathed-from-rising-doubts-on-emerging-global-growth-and-central-banks\/","title":{"rendered":"Hedge funds unscathed from rising doubts on emerging, global growth and central banks"},"content":{"rendered":"

Following 3 weeks of tactical retracement to digest the
\nyear-end rally, multiple events in Emerging contributed to
\nunsettle EM and DM markets<\/strong> \u2013 in particular global equities,
\nUSD-JPY, and weaker US LT yield. Weak PMI in China,
\nconcerns about the vulnerability of its shadow banking and
\ninstability in Turkey, Argentina and Ukraine, awoke broader
\ninvestor concerns. Concerns about a risk of contagion from EM
\ntwin deficits countries. Concerns about the pace of global
\nrecovery, as economic readings weaken. Doubts on central
\nbanks’ will to do ‘whatever it takes’.
\nAfter a quiet start, the
\nstrategies most directionally exposed to equity markets – L\/S
\nEquity, Special situation and CTAs – have detracted
\nperformance by month-end. In contrast, relative value
\nstrategies have successfully weathered market instability.<\/quote><\/p>\n

L\/S Equity funds entered 2014 with a reasonably
\nconstructive outlook.<\/strong> They shaved off some of their exposure in
\nearly January. Long bias funds reduced their gross exposure
\nby around 10%, variable bias reduced their net exposure from
\n45% down to 35%.
\nWith a strong overall exposure to cyclical
\nsectors though, their average market beta continued to hover
\naround 35%. Rising equity dispersion, the start of the earnings
\nseason, and healthier short trading conditions were favorable to
\nvariable and market neutral bias funds.<\/quote>
\n They outperformed long
\nbias funds prior to the sell-off. Afterward, European funds
\noutperformed their US peers. Long bias funds ended January
\ndown -1.6%, variable bias up +0.5%, and market neutral funds
\nwere up +0.8%. Hedge fund managers haven\u2019t meaningfully
\naltered either their gross or their net exposure so far, which is a
\nsign that they aren\u2019t buying an EM contagion scenario for now.<\/p>\n

Similarly Event driven funds produced positive returns
\nduring the first part of January.<\/strong> Range trading equity markets
\nhad a limited impact on deal-specific merger spreads.
\nIncreased flows of M&A deals early this year provided a fresh
\npool of opportunities for managers.
\nMeanwhile the main activist
\npositions held in portfolios continued to progress.
\nUnsurprisingly, rising risk aversion in the second part of January
\ndented into merger spreads and into the long exposure of
\nspecial situations funds.<\/quote>
\n While the environment remains
\nsupportive for merger funds, cooling liquidity in the US and
\nmore fairly valued companies will likely incline hedge fund
\nmanagers to be more selective.
\n
In Japan, a capex rebound and corporate cash hoarding bode
\nwell for M&A trends, in particular in cross borders, which have
\nrepresented the bulk of Japanese operations since 2012. The
\nMerger arbitrage funds ended January up +0.9%, and the
\nSpecial Situation funds down only -0.2%.<\/p>\n

Dispersion among CTAs was striking during the month.<\/strong>
\nLong Term CTAs were down as much as -5.4% in January, in
\ncontrast with Short Term CTAs ending up +0.4%. In the first
\npart of the month, long term funds generated performance on
\ncommodity FX shorts and long USD positions.
\nMeanwhile,
\ndirectionless equity markets provided limited opportunities for
\nshort term CTAs, flat over these 3 weeks. The wheel then
\nturned, with a dominant exposure to equity.<\/quote>
\n Long term funds
\ntook a severe hit, on their JPY-USD cross exposure as well.<\/p>\n

Equity losses incurred by Global macro funds during the
\nsell-off were offset by gains accumulated earlier in the month<\/strong> –
\nin long duration US and EU trades in particular. They ended
\nflat.
\nFX and LT rates are their largest gross exposures as we
\nenter February. They enjoy a growing set of opportunities from
\nDM’s central banks dispersion and relative value trades in EM
\nmarkets.<\/quote>
\n While net neutral on EM FX and Energy, their average
\n60% gross exposure on these 2 markets illustrate some of their
\nmarket themes.<\/p>\n

Softer data in the US and a slight disappointment from the
\nFed’s resolution to maintain its envisaged pace of tapering
\nprovided a favorable backdrop for credit and fixed income
\nfunds.<\/strong> CB managers and credit arbitrage funds accumulated
\nsmall gains in the early part of the month, courtesy of marginally
\ntightening credit spreads.
\nLater on, rising implied volatility
\nmitigated the losses incurred by CB managers on the equity
\ncomponent during the sell-off; and L\/S Credit funds’ cut in their
\nnet exposure from 70% to around 40% during the 3 first weeks
\nof January, mitigating the impact from widening spreads across
\nthe board.<\/quote>
\n They all ended up the month with positive returns,
\nup +0.5% on average.<\/p>\n

Hedge funds have taken the lead in asset class ranking in
\nJanuary, with relative value approaches offsetting losses in
\nmore directional strategies. “Healthy market dispersion, EM and
\nDM macro themes, a set of micro arbitrage in corporate
\noperations, EPS releases, sector rotation: some of the key
\ningredients for alternative investments’ outperformance”<\/em>, says
\nJean-Baptiste Berthon, senior cross asset strategist at Lyxor
\nAM.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Lyxor Hedge Fund Index was down only -0.4% in January, outperforming the MSCI World down -3.8%. 8 Lyxor Strategy Indices out of 12 ended the month in positive territory, led by the Lyxor Fixed Income Arbitrage Index (+1.74%), the Lyxor Merger Arbitrage Index (+0.92%) and the Lyxor L\/S Equity Market Neutral Index (+0.83%).<\/p>\n","protected":false},"author":20,"featured_media":32730,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1655,1763,1723,1690,1651,1662,1672],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/32732"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=32732"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/32732\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/32730"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=32732"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=32732"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=32732"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}