![\"as_markets_recovered_in_july_hedge_funds_have_swiftly_adjusted_upwards_their_beta.jpg\"](\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/07\/as_markets_recovered_in_july_hedge_funds_have_swiftly_adjusted_upwards_their_beta.jpg\")
<\/a>The winning streak for hedge funds continued last week with all strategies, besides CTAs,
\nbenefitting from the stabilization of market conditions. The Lyxor Hedge Fund Index was up
\n0.5%, bringing the month to date performance to a solid 1.6%. Global Macro managers
\noutperformed last week, on the back of long positions on the US Dollar. Buoyant economic
\ndata in the US has fuelled expectations that the Fed could start to reverse its very dovish
\nstance at the July 26-27th FOMC meeting. <\/p>\n
Month to date, the Lyxor Hedge Fund Index is up 1.6% and strategies with more market
\ndirectionality benefitted the most from the market rebound. Both L\/S Equity Long Bias and
\nSpecial Situations managers are up 3.3% month to date (as of July 19th). Cautious hedge
\nfund managers have swiftly adjusted upwards their equity beta in July. But the most
\ndefensive managers lagged as the Brexit shock was offset by solid economic data
\nreleases. Preliminary PMIs in the euro area in July actually suggest that economic activity
\ncontinued to be solid post-Brexit vote. <\/p>\n
On a negative note, CTAs are down for the second week in a row. Rising sovereign bond
\nyields and some long exposures to the Turkish Lira vs. USD contributed to losses. The
\nCTA strategy remains nonetheless in the black month to date. We maintain an overweight
\nstance on CTAs, on the back of their strong portfolio diversification benefits and as a hedge
\nagainst downside risk that, in our view, remains significant. <\/p>\n
Finally, the factor rotation in equities, which saw a reversal in momentum and a rebound in
\nvalue, has largely spared market neutral L\/S managers. They are sensitive to the
\nmomentum factor. The rotation has been stronger in Asia as a result of expectations that
\nJapanese authorities could adopt additional easing steps, both fiscal and monetary. The
\nrebound in Asian value stocks has proved supportive for some pan-Asian quantitative L\/S
\nEquity managers after a challenging first half. We maintain an overweight stance on market
\nneutral L\/S Equity funds on the back of the assumption that the factor rotation is behind us.
\nExcept in Asia, we expect little additional upside for value stocks in the US and Europe. <\/p>\n