Equity market volatility stayed elevated in March, as tech stocks were under pressure over user data privacy
\nand the U.S. administration announced trade barriers targeting China. The MSCI World was down 2.5%,
\nextending February\u2019s 4.3% loss. U.S. and Japanese indices underperformed, while the European market
\noutperformed. At the sector level, defensive sectors such as utilities, consumer staples and energy
\noutperformed, both in the U.S., the EMU and China. Meanwhile, IT and financials suffered, along with trade
\nsensitive sectors such as materials and industrials.<\/p>\n
Unstable market conditions were supportive for hedge funds, in relative terms. Liquid hedge fund benchmarks
\nwere down -1% in March, with Distressed and Special Situations strategies underperforming. On a positive
\nnote, low beta strategies did well. CTAs managed to limit losses, in particular during the rise in risk aversion
\nover the last two weeks. Short USD and long commodity positions were rewarding for them as the U.S. dollar
\ndepreciated and commodities jumped in the context of looming trade wars. Long equity positions detracted
\nhowever. Meanwhile, Merger Arbitrage, Fixed Income Arbitrage and L\/S Equity Market Neutral also
\noutperformed in March and over the last two weeks. These are typical low beta strategies that are increasingly
\nattractive as the tradeoff between strong growth and monetary tightening is set to translate into a structurally
\nhigher volatility regime. Merger Arbitrage is especially attractive in the context of strong M&A volumes thus far in
\n2018, which we discuss on page 2 of this report.<\/p>\n
In the near term, we believe risk assets could experience a short term rebound. The great health of the US
\neconomy and our expectation that Trump\u2019s fierce rhetoric over protectionism could have reached a peak, at
\nleast temporarily, is supportive. Yet, longer term, our appetite for risk is diminishing. In terms of hedge fund
\nrecommendations, that will gradually translate into a reweighting of low beta strategies (we currently maintain an
\nOverweight stance on Merger Arbitrage and Fixed Income Arbitrage, but we are Underweight CTAs and at
\nbenchmark on Market Neutral L\/S) and a downgrade of high beta strategies such as Special Situations, on
\nwhich we are currently Overweight.<\/p>\n","protected":false},"excerpt":{"rendered":"
Unstable market conditions were supportive for hedge funds, in relative terms. Liquid hedge fund benchmarks
\nwere down -1% in March, with Distressed and Special Situations strategies underperforming. On a positive
\nnote, low beta strategies did well.<\/p>\n","protected":false},"author":1,"featured_media":70531,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1687,1743,1655,1723,1690,1651,1437,1662,2068,1672],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/70533"}],"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=70533"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/70533\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/70531"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=70533"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=70533"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=70533"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}