{"id":46447,"date":"2015-11-17T07:01:22","date_gmt":"2015-11-17T06:01:22","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/the-wheel-turned-in-favor-of-directional-strategies\/"},"modified":"2015-11-17T07:01:22","modified_gmt":"2015-11-17T06:01:22","slug":"the-wheel-turned-in-favor-of-directional-strategies","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/the-wheel-turned-in-favor-of-directional-strategies\/","title":{"rendered":"The wheel turned in favor of directional strategies"},"content":{"rendered":"<p>Encouraging October economic releases, speculation about<br \/>\nnon-US central banks actions, and the re-risking of the smart<br \/>\nmoney helped to fuel a rally. The wheel turned in favor of Event<br \/>\nDriven and the longest bias L\/S Equity. In contrast, CTAs<br \/>\nunderperformed, hit on their long bonds exposure. Market Neutral<br \/>\nfunds also suffered from factor rotations.<\/p>\n<p>Within the L\/S Equity space, Within the L\/S Equity space, US long bias US long bias US long bias funds led the led the led the group,<br \/>\nwhile p while pressure ressure ressure fellupon the upon the upon the Market Neutral funds Market Neutral funds Market Neutral funds. After weeks of<br \/>\nbleeding, the longest bias funds staged a substantial rally,<br \/>\nespecially in the US. It made up for most of the lost ground since<br \/>\nthe end of August. Exposures were little altered over the period:<br \/>\nthis was mainly a beta recovery. <\/p>\n<p>In contrast, In contrast, the other sub the other sub the other sub-strategies o strategies o strategies only captured part of the nly captured part of the<br \/>\nbullish impetus bullish impetus impetus. The Variable bias funds, which had demonstrated<br \/>\nan impressive resilience during the sell-off, remained cautiously<br \/>\nexposed. By the end of October, they had only marginally rebuilt<br \/>\ntheir net exposures. <\/p>\n<p>Market neutral endured a difficult month, hit by tw Market neutral endured a difficult month, hit by two rounds of o rounds of<br \/>\nmarket rotation. The first one started by the end of September, with<br \/>\na severe turn in the Momentum factor. The second rotation \u2013 of<br \/>\nlesser violence \u2013 unfolded after the FOMC, which resulted in a<br \/>\nsector repositioning. <\/p>\n<p>The loads of EPS releases published over the month were not a<br \/>\nkey source of alpha. While better than feared, the US season<br \/>\nremained very macro driven with little stock discrimination. The<br \/>\nseason in Europe (and to a lesser extent in Japan) proved more<br \/>\nchallenging, with more disappointments. As markets gradually exit<br \/>\nthis W-shaped episode, stock correlations are starting to recede.<br \/>\nThis should help restore the alpha potential. <\/p>\n<ul>\n<li> Event Driven funds, main victims of the sell Event Driven funds, main victims of the sell , main victims of the sell-off, were prime off, were prime<br \/>\nbeneficiaries of the rally. beneficiaries of the rally. Special situation funds outperformed in<br \/>\nOctober. Receding concerns about global growth, further easing<br \/>\nexpected from non-US central banks, and flows returning to the market altogether gave a strong lift to corporate situations. The<br \/>\nrecovery was particularly notable in the most liquid segments. The<br \/>\nrally in spinoffs and IPOs was faster than in activist or in distressed<br \/>\npositions. The healthcare sector continued to be a source of<br \/>\nvolatility. However funds shaved off their holdings in the sector, and<br \/>\nin particular, few funds had meaningful exposure to Valeant. The<br \/>\nrecovery in Merger Arbitrage lagged, with several deals coming<br \/>\nunder regulatory scrutiny. <\/li>\n<\/ul>\n<ul>\n<li> The L \/S Cr edit Arbitrage edit Arbitrage edit Arbitrage funds delivered flat returns delivered flat returns.<br \/>\nConservatively exposed, they didn\u2019t benefit from the tightening of<br \/>\nHY spreads both in the US and in Europe.<\/li>\n<li> CTAs\u2019 long exposures \u2019 long exposures \u2019 long exposures in bonds ca in bonds ca in bonds came under pressure me under pressure me under pressure. The<br \/>\nperformance of the long-term models see-sawed over the month,<br \/>\npaced by the volatility of energy contracts and by rates. US yields,<br \/>\nwhich surged following the FOMC, were the primary detractor of<br \/>\nperformance. The rapid repricing of the US front curve was partially<br \/>\noffset by gains in European bonds. These rallied following ECB\u2019s<br \/>\nhints at a possible action by December.<\/li>\n<\/ul>\n<p>Currencies and equities were minor but positive contributors. The<br \/>\noverall dollar exposure of long-term models was gradually cut.<br \/>\nInstead, they held increasingly differentiated FX positions, including<br \/>\nshort Euro and JPY (vs. USD), against longs in GBP. The equity<br \/>\nbucket was also mildly positive, as models gradually rebuilt their<br \/>\nlong positions.<\/p>\n<p>Faster in rotating their portfolios, short-term models outperformed<br \/>\ntheir long-term peers in October. <\/p>\n<ul>\n<li> Strong Global Macro Strong Global Macro Strong Global Macro returns, boosted by their long held dollars , boosted by their long held dollars<br \/>\nand equities. and equities The month started on a positive note. Their gains<br \/>\nfrom the equity rally more than offset losses in the FX and rates<br \/>\nexposures. They actively rotated their bond exposures, which did<br \/>\nnot deliver substantial gains. However, the bulk of the P&#038;L was<br \/>\nachieved after the mildly hawkish FOMC. Their long held strong<br \/>\nUSD positions finally paid off. Their exposure to commodities<br \/>\nremained limited in net exposure, most of their stakes being<br \/>\nconcentrated on energy relative value arbitrage.<\/li>\n<\/ul>\n<p><em>\u201cTherally is losing breath rally is losing breath rally is losing breath, providing fading support to , providing fading support to the most the most<br \/>\ndirectional L\/S Equity and Event Driven directional L\/S Equity and Event Drivenfunds. Our focus gradually . Our focus gradually<br \/>\nreturns to the relative value and macro strategies. returns to the relative value and macro strategies.\u201d<\/em> says JeanBaptiste<br \/>\nBerthon, senior cross asset strategist at Lyxor AM.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Lyxor he Lyxor he LyxorHedge Fund Index was Hedge Fund Index was Hedge Fund Index was up+1.1% in October October October. 8 out<br \/>\nof 11 Lyxor Indices ended the month in positive territory. The Lyxor<br \/>\nLS Equity Long Bias Index (+4.5%), the Lyxor Special Situations<br \/>\nIndex (+3.5%) and the Lyxor Global Macro Index (+2.1%) were the<br \/>\nbest performers.<\/p>\n","protected":false},"author":20,"featured_media":46445,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1687,1743,1655,1723,1690,1662,2243,2068,1672],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/46447"}],"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=46447"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/46447\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/46445"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=46447"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=46447"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=46447"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}