{"id":62830,"date":"2017-05-05T01:24:00","date_gmt":"2017-05-04T23:24:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/exit-frexit-special-situations-and-ctas-take-the-podium\/"},"modified":"2019-12-31T01:55:18","modified_gmt":"2019-12-31T00:55:18","slug":"exit-frexit-special-situations-and-ctas-take-the-podium","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/exit-frexit-special-situations-and-ctas-take-the-podium\/","title":{"rendered":"Exit Frexit: Special Situations and CTAs take the Podium"},"content":{"rendered":"

Unlike the surveys ahead of the UK referendum and the U.S. elections, French election
\npolls seemed to be more reliable. The chances of Le Pen winning the presidency seem to
\nbe very slim and not within margins of error. The medium-term risk of a Frexit has
\nsubstantially subsided. Yet, the clear lead of Macron (expected to win by 59 to 64%) cannot
\novershadow the powerful anti-establishment call also expressed in the vote. The leeway to
\nlead reforms in France will be tested during the June general elections. Neither candidate
\ncomes from a mainstream party, it is not clear that they would obtain a governing majority.<\/p>\n

Unsurprisingly, global risk assets surged. The Euro settled at around +1.5%, Euro-banks
\nsurged +8%, the French OAT vs. Bund 10Y spread shrunk by 15 bps, and gold lost about –
\n1%.<\/p>\n

All strategies were up last week. Hedge funds captured the upside which was a function of
\nthe protections implemented ahead of the French vote. Special Situations outperformed, as
\ntheir cyclical and turnaround positions surged. CTAs\u2019 strong long equity exposure offset
\nlosses in their short Euro and in their long Euro bonds. By contrast, hedges and relative
\npositioning in Global Macro and L\/S Equity funds capped the upside.<\/p>\n

Markets and hedge funds were also supported by an upbeat earning season. In Europe,
\nthe fading political risk benefitted most reporting companies, with less regards to their
\nfundamentals. Stocks rose across the board, however, alpha generation was modest. We
\nexpect the stock-picking environment to improve as investors refocus on companies\u2019
\nfundamentals and on the European recovery.<\/p>\n

In the U.S., in-line earning announcements no longer suffice to translate into meaningful
\nstock performance. Expensive valuations and high Q1 earnings expectations are spurring
\nmore acute fundamental discrimination. In contrast with Europe, fund managers make do
\nwith more modest market contribution, but they benefit from better alpha prospects. This
\nshould support neutral U.S. funds and longer bias L\/S Equity funds in Europe.<\/p>\n

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