![\"m_a_deal_spreads_widened_since_mid-june.jpg\"](\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/09\/m_a_deal_spreads_widened_since_mid-june.jpg\")
<\/a>For the first time since October 2016, the monthly performance of Event-Driven funds was in negative
\nterritory. The strategy remains nonetheless the stellar performer in 2017, up 5.7% year to date according to
\nthe Lyxor Event Driven Broad index. The summer air pocket was mainly due to the negative returns
\ndelivered by special situations funds (-1.8% in August) which suffered losses on consumer holdings. Health
\ncare stocks such as NuVasive and Zimmer Biomet detracted from performance earlier in the month; while
\nmore recently Sotheby\u2019s and Nestle dragged down the returns of special situations funds. Meanwhile,
\nmerger arbitrage funds stayed afloat (+0.1% in August) despite the widening of deal spreads over the
\ncourse of August. The NXP Semiconductors vs. Qualcomm planned merger continued to be an important
\ndriver of performance of merger funds last month, while Time Warner vs. AT&T was a detractor.<\/p>\n
On a positive note, CTAs continued to edge higher last week, and as signaled in the previous edition of this
\nreport, it is noteworthy that CTAs are presently less reliant on equity trends to generate returns than they
\nwere a few months ago. The Lyxor CTA Broad Index was up 1% last week and 2.1% in August while the
\nMSCI World was flat in August. FX and fixed income trends were the main drivers of recent CTA
\nperformance. The continued fall in bond yields despite tight labour market conditions in the U.S. and price
\nacceleration in the euro area in August failed to dent the downward trend in bond yields. In parallel, the
\nEuro continued to appreciate versus the USD and that was also rewarding.<\/p>\n
Going forward, we maintain an overweight stance on Event-Driven strategies.
\nWe believe the summer
\nbreak is likely to be short lived. On the one hand, we still expect that the U.S. administration will be able to
\nmove forward with fiscal reform in the coming months. If confirmed, this is likely to foster corporate activity
\nand provide opportunities for special situations funds. Meanwhile, with deal spreads at a wider level, we
\nfind merger arbitrage more attractive now than it was a few months ago. On top of that it is important to
\nnote that a few core holdings in merger portfolios are likely to experience a rerating in the deal price, which
\nwould fuel returns. <\/p>\n