{"id":56137,"date":"2016-09-20T02:35:30","date_gmt":"2016-09-20T00:35:30","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/rate-hike-fears-mildly-drag-down-hedge-funds\/"},"modified":"2019-12-31T01:05:47","modified_gmt":"2019-12-31T00:05:47","slug":"rate-hike-fears-mildly-drag-down-hedge-funds","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/rate-hike-fears-mildly-drag-down-hedge-funds\/","title":{"rendered":"Rate hike fears mildly drag down hedge funds"},"content":{"rendered":"<p>The drawdown on equities and bonds, an unusual positive correlation, has caused losses<br \/>\non risk parity and CTA funds. The latter experienced a drawdown that is comparable with<br \/>\nprevious episodes of jumping correlations in Q2-13 and Q2-15. L\/S Equity funds were also<br \/>\ndown last week, though market neutral players were flat to slightly positive.<\/p>\n<p><quote>On a positive note, Event-Driven managers were flat in the aggregate while merger<br \/>\narbitrageurs were positive. Event-Driven is now the best performing strategy in 2016 YTD.<\/quote><\/p>\n<p>Meanwhile, Global Macro managers outperformed on the back of their short duration<br \/>\nstance and long USD positions.<br \/>\nOverall, hedge funds were down 0.8% last week, a rather mild movement compared to the<br \/>\n2.6% loss registered on the MSCI world and the 1.6% loss registered on the 10-year<br \/>\nTreasury (performance between Sept. 6th and Sept. 13th of total return indices).<\/p>\n<p>While we believe that the Fed is unlikely to hike rates at its Sept. 21st FOMC meeting, any<br \/>\nhawkish stance is likely to lengthen the bond market correction. Since 2010, bond markets<br \/>\nexperienced three major corrections: in 2010, in 2013 (the taper tantrum) and in 2015. <\/p>\n<p>On average, the 10-year Treasury lost 7% during these periods and the sell off lasted for 44<br \/>\ndays from peak to trough. As shown on page 2, recent bond market movements are, thus,<br \/>\ncomparatively mild. But on top of the FOMC meeting, the recent rise of Donald Trump in<br \/>\nUS presidential polls and Hillary Clinton\u2019s health issues contributed to raise uncertainty.<\/p>\n<p>Trump\u2019s election campaign entails expansionary fiscal policies which could exacerbate<br \/>\nbond vigilantes\u2019 concerns in case he continues to catch up in polls.<\/p>\n<p><strong>As a result, we tactically cut the investment recommendation on long term CTAs to neutral<br \/>\n(from slight overweight) and upgrade short term CTAs to slight overweight (from neutral).<\/strong><\/p>\n<p><a href=\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning.jpg\"><img loading=\"lazy\" class=\" aligncenter size-full wp-image-56135\" src=\"IMG\/jpg\/ctas_suffered_from_their_long_equity_and_bond_positioning.jpg\" alt=\"ctas_suffered_from_their_long_equity_and_bond_positioning.jpg\" align=\"center\" width=\"885\" height=\"346\" \/><\/a><div id='gallery-1' class='gallery galleryid-56137 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\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning.jpg'><img width=\"470\" height=\"313\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning-470x313.jpg\" class=\"attachment-herald-lay-c1 size-herald-lay-c1\" alt=\"\" loading=\"lazy\" srcset=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning-470x313.jpg 470w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning-300x200.jpg 300w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning-414x276.jpg 414w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning-130x86.jpg 130w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/09\/ctas_suffered_from_their_long_equity_and_bond_positioning-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>Over the recent days the Fed has expressed its willingness to move forward with rate<br \/>\nhikes. Yet, recent data releases have been uninspiring in the US. This contradiction led<br \/>\ninvestors to take profits on both equities and bonds after the summer lull. <\/p>\n","protected":false},"author":1,"featured_media":56135,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1687,1655,1723,1690,1651,2007,1662,2243,2068,1672],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/56137"}],"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=56137"}],"version-history":[{"count":1,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/56137\/revisions"}],"predecessor-version":[{"id":56138,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/56137\/revisions\/56138"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/56135"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=56137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=56137"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=56137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}