{"id":44722,"date":"2015-09-14T00:42:00","date_gmt":"2015-09-13T22:42:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/event-driven-knocked-with-few-heavy-weight-funds\/"},"modified":"2015-09-14T00:42:00","modified_gmt":"2015-09-13T22:42:00","slug":"event-driven-knocked-with-few-heavy-weight-funds","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/event-driven-knocked-with-few-heavy-weight-funds\/","title":{"rendered":"Event Driven knocked with few heavy-weight funds"},"content":{"rendered":"

The deflation and growth scares, which built up over the
\nsummer, accelerated following the CNY devaluation. They
\nmorphed into a vicious cycle in the last week of August.<\/strong> With
\nvolatility reaching 55 and equities plunging by the hour, Monday 24
\nwill from now on count among the major stress episodes used as
\nreference. The bulk of the Lyxor Hedge Fund index was endured
\nduring that week. Event Driven funds were the main losers. Return
\ndispersion was elevated. Losses in some heavy-weight funds hid
\ndecent performances among macro traders (CTAs and Global
\nMacro). A milder pressure on credit and govies supported credit
\nand fixed income arbitrage strategies. The L\/S Equity space
\nproved resilient apart from Asian and US long bias managers. <\/p>\n

To the notable exception of Asian and US long bias funds, the
\nL\/S Equity strategy was remarkably resilient.<\/strong> Most funds had
\nsteadily reduced their net exposures over the summer, cautiously
\npositioned ahead of the sudden end-of-August debacle. In Europe,
\nVariable bias managers implemented efficient hedging strategies,
\nwith an increased number of single shorts. European managers,
\nwhich generally missed the reflation trade early this year, regained
\nall the lost ground over the summer. They even outperformed
\nmarket neutral strategies. In contrast, Lyxor Asian managers
\nsuffered in August, down -2% in aggregate. Their dramatic cut in
\nnet exposure since June (-10%) limited the damages. US Long
\nBias also took a major hit, losing most of their beta.<\/p>\n

Event Driven funds were the main losers, with a severe plunge
\nacross the board.<\/strong> The aggregate Event Driven performance was
\nclose to flat before the last week of the month. Until then, some
\nlosses were recorded in China and Resources related exposures.
\nThey were offset by positive earnings releases in few large
\ncorporate situations and by the favorable closing of several M&A
\ndeals. The last week of August unsettled both merger spreads and
\nthe pricing of corporate situations, including activist positions.
\nSpecial Situation underperformed Merger Arbitrage funds, even
\nadjusted from their market beta. The sudden widening of deal
\nspreads and the depressed valuation levels of corporate situations
\nwill probably open a phase of recovery going forward.<\/p>\n

The Lyxor L\/S Credit Arbitrage index was only down -1.5%.
\nThe market turmoil infected credit markets but less than equities.<\/strong>
\nSpreads had already meaningfully widened over the recent
\nmonths. This kept managers on a very cautious footing, positioned
\non high quality and high grade issues, with increased
\ndiversification. As dispersion returned in the space, short
\nopportunities also emerged – and not only in the energy segment.
\nIn particular weakening cross credit correlations provided fixed
\nincome arbitrage funds with greater relative value opportunities.
\nThe alpha produced by Credit strategies alleviated the adverse
\nbeta contribution.<\/p>\n

High dispersion among CTAs in August.<\/strong> CTAs were up nearly
\n+1% before the last week of August. With their long bond and USD
\npositions along with their short commodities exposures, they were
\nwell hedged against the various risks being priced in. In particular:
\na slower global growth, a slower Fed normalization and the
\nChinese ripple effects on EM countries and resources. During the
\nlast week, a majority of funds remained reasonably resilient.
\nHowever some heavy weight funds were substantially hurt on their
\nremaining long equity holdings and on some of their long USD
\ncrosses. ST models outperformed thanks to a faster portfolio
\nrepositioning. We observe that, in aggregate, LT models cut their
\nabout 30% net equity exposure down to less than 10% over that
\nweek. <\/p>\n

Heterogeneous returns among Global Macro, with losses in
\nheavy weights.<\/strong> Until the last week of August the strategy remained
\nresilient, with a slightly positive MTD return. While cautiously
\nexposed to risky assets, their hedges had little efficiency in the selloff.
\nThey were essentially hit in their equity and long USD positions,
\nwith limited cushion from bonds or safe havens. However, losses
\nin large macro funds actually hide a more heterogeneous and
\nfavorable picture. After the sell-off, Lyxor Global Macro funds were
\non average 10% net long on equities (from 15% early August), with
\nmore than half of their equity positions in Europe. They continue to
\nplay commodities mostly in relative value. Overall they remain long
\nUSD, especially against EUR and GBP. <\/p>\n

\u201cBeyond a possible near-term rally, we expect moderate and
\nriskier returns from traditional assets. Thus, we continue to
\nstrengthen our focus on hedge funds\u2019 relative value approaches.\u201d<\/em>
\nsays Jean-Marc Stenger, Chief Investment Officer for Alternative
\nInvestments at Lyxor AM.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Lyxor Hedge Fund Index was down -2.7% in August. 1 out
\nof 12 Lyxor Indices ended the month in positive territory. The Lyxor
\nConvertible Arbitrage Index (+3.3%), the Lyxor L\/S Equity Variable
\nBias Index (-0.7%), and the Lyxor L\/S Equity Market Neutral Index
\n(-1.1%) were the best performers. <\/p>\n","protected":false},"author":1,"featured_media":44720,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1687,1655,1723,1690,1651,1662,2243,1672],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/44722"}],"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\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=44722"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/44722\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/44720"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=44722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=44722"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=44722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}