{"id":49014,"date":"2016-02-15T00:10:06","date_gmt":"2016-02-14T23:10:06","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/hedge-funds-remarkable-resilience-in-turmoil\/"},"modified":"2019-12-31T00:29:08","modified_gmt":"2019-12-30T23:29:08","slug":"hedge-funds-remarkable-resilience-in-turmoil","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/hedge-funds-remarkable-resilience-in-turmoil\/","title":{"rendered":"Hedge funds\u2019 remarkable resilience in turmoil"},"content":{"rendered":"<ul>\n<li> <strong>Hedge Funds displayed remarkable resilience in January.<\/strong> Both<br \/>\nmarkets and analysts started the year with reasonable growth<br \/>\nexpectations. These were aggressively revised down, triggered by<br \/>\nthe release of the disappointing Chinese PMI and the CNY<br \/>\ndepreciation. Strikingly, investors started to price in more serious<br \/>\nodds for a Chinese hard landing, the growing central banks\u2019<br \/>\nimpotence, the risk of a US recession, and the return of global<br \/>\ndeflation.<\/li>\n<\/ul>\n<p><quote>In that context, CTAs thrived on their short commodities and long<br \/>\nbond exposures. FI Arbitrage and Global Macro funds exploited<br \/>\nmonetary relative and tactical opportunities. To the exception of the<br \/>\nL\/S Equity Long Bias and Special Situations funds \u2013 hit on their<br \/>\nbeta &#8211; the other strategies managed to deliver flat to modestly<br \/>\nnegative returns.<\/quote><\/p>\n<ul>\n<li> <strong>L\/S Equity funds were resilient as they remained on the<br \/>\nsideline.<\/strong> European managers kept their low market exposure. Their<br \/>\nbeta was mainly expressed through sectors tilts, with the bulk of<br \/>\ntheir allocation on the consumer and financial sectors. Implicitly,<br \/>\nthey played the reflation and stronger domestic demand themes,<br \/>\nkeeping some optionality on the coming March ECB meeting.<br \/>\n<br \/>The performance of the Long bias funds mirrored their beta<br \/>\nexposure. They produced limited alpha, amid elevated stock<br \/>\ncorrelation and thinner dispersion.<br \/>\n<br \/>Japanese funds maintained their cautious positioning since August<br \/>\n2015. They raised their allocation to financials but maintained low<br \/>\nexposure to domestic demand driven sectors. Such a positioning<br \/>\nis consistent with greater expectations from BoJ, but persisting<br \/>\nskepticism as to Abenomics\u2019 success.<\/li>\n<\/ul>\n<ul>\n<li> <strong>The pricing of M&#038;A deals and the Merger Arbitrage returns<br \/>\nwere reasonably insulated from the market turmoil.<\/strong> Investors\u2019<br \/>\nconcerns expressed in January did not put in question the existing<br \/>\nM&#038;A operations. Besides, merger funds benefitted from several<br \/>\ndeal completions. The erosion of executives\u2019 confidence and<br \/>\nmarket volatility tamed the pipeline of M&#038;A deals in January.<br \/>\nHowever, significant operations continued to fuel arbitragers\u2019<br \/>\nopportunities, including the announced Shire vs. Baxalta, Tyco vs.<br \/>\nJohnson Controls, Abott vs. Alere deals.<\/li>\n<\/ul>\n<p><quote>Special Situation suffered yet again in line with their market beta.<br \/>\nThere was a limited number of idiosyncratic events in the Special<br \/>\nSituations space. Their aggregate net exposure remained steady at<br \/>\n50% &#8211; including a 10% of short indices &#8211; the bulk of which<br \/>\nallocated to consumer, telecom and technology situations.<\/quote><\/p>\n<ul>\n<li> <strong>The rebound in oil prices eased the pressure on L\/S Credit<br \/>\nstrategies.<\/strong> While credit markets kept on bleeding, they<br \/>\noutperformed equity markets. Spreads already pricing a recession<br \/>\nand the rebound of oil did help. With growing dispersion within credit sectors, the alpha backdrop improved. By month-end L\/S<br \/>\nCredit funds started to chase opportunities, while adding long<br \/>\ngovernment bonds.<\/li>\n<\/ul>\n<p><a href=\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money.jpg\"><img loading=\"lazy\" class=\" aligncenter size-full wp-image-49008\" src=\"IMG\/jpg\/suivi_du_smart_money.jpg\" alt=\"suivi_du_smart_money.jpg\" data-description=\"Source : Bloomberg, Lyxor AM\" align=\"center\" width=\"664\" height=\"552\" \/><\/a> <\/p>\n<ul>\n<li> <strong>CTAs, best performers, thrived on their short commodities and<br \/>\nlong bond exposures.<\/strong> Meanwhile they were immune from the<br \/>\nequity sell-off, having cut all of their remaining exposures by midDecember.<br \/>\nShort-term models even built up short exposures to<br \/>\nequities.<br \/>\n<br \/>They gave back some of the accumulated gains by month-end.<br \/>\nIndeed, the sharp rebound in oil prices hit their short on energy<br \/>\nfutures and their short FX exposures on the commodity block (CAD<br \/>\nespecially). As of today, they are -40% short on energy positions<br \/>\nand 49% long on USD crosses.<br \/>\n<br \/>CTAs once again stood as hedge in portfolios during risk aversion<br \/>\nepisodes.<\/li>\n<\/ul>\n<ul>\n<li> <strong>Bond positions saved the day for Global Macro funds.<\/strong><br \/>\nIndividual positioning displayed increasing managers\u2019 divergence.<br \/>\nIn aggregate, most of the gains were made main through global<br \/>\nrate arbitrage. They were overall long US and short European<br \/>\nbonds, according to their relative monetary policy anticipations.<br \/>\nThey did not profit from BoJ unexpectedly pushing rates further into<br \/>\nnegative territories: they held a small short allocation to Japanese<br \/>\nbonds. A majority of the managers refrained from playing<br \/>\ncommodities, though some of them built up short positions in the<br \/>\nsecond half.<\/li>\n<\/ul>\n<p><quote>Within their equity bucket (a small one, around 10% in net<br \/>\nexposure), they concentrated on reflation zones: a drag on<br \/>\nperformance, but a modest one. Overall, global macro funds<br \/>\ncontinue to maintain relative value and balanced exposures. Their<br \/>\nkey vulnerability lies with their long USD crosses, which would<br \/>\nsuffer from a reversal in dollar.<\/quote><\/p>\n<p><em>\u201cWhile a sub-par global growth seems well priced in, the<br \/>\naccumulation of downside risks lead us to stick to our preference<br \/>\nfor relative-value, tactical and macro styles, which should<br \/>\noutperform the more directional strategies.\u201d<\/em> says Jean-Baptiste<br \/>\nBerthon, senior cross asset strategist at Lyxor AM.<div id='gallery-1' class='gallery galleryid-49014 gallery-columns-3 gallery-size-herald-lay-c1'><figure class='gallery-item'>\n\t\t\t<div class='gallery-icon landscape'>\n\t\t\t\t<a class=\"herald-popup\" href='http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money.jpg'><img width=\"470\" height=\"313\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-470x313.jpg\" class=\"attachment-herald-lay-c1 size-herald-lay-c1\" alt=\"\" loading=\"lazy\" srcset=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-470x313.jpg 470w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-300x200.jpg 300w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-414x276.jpg 414w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-640x426.jpg 640w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-130x86.jpg 130w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/02\/suivi_du_smart_money-187x124.jpg 187w\" sizes=\"(max-width: 470px) 100vw, 470px\" \/><\/a>\n\t\t\t<\/div><\/figure>\n\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>The Lyxor Hedge Fund Index was down -0.9% in January. 5<br \/>\nout of 11 Lyxor Indices ended the month in positive territory. The<br \/>\nLyxor CTA Long Term Index (+2.2%), the Lyxor Global Macro Index<br \/>\n(+0.7%), and the Lyxor Fixed Income Arbitrage Index (+0.7%) were<br \/>\nthe best performers.<\/p>\n","protected":false},"author":20,"featured_media":49008,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1687,1743,1655,1723,1690,1651,2007,1662],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/49014"}],"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=49014"}],"version-history":[{"count":1,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/49014\/revisions"}],"predecessor-version":[{"id":49015,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/49014\/revisions\/49015"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/49008"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=49014"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=49014"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=49014"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}