Philippe Ferreira

Philippe Ferreira

Director, Senior Cross-Asset Strategist

Lyxor Asset Management


Cautious Hedge Fund Positioning Should Prove Supportive

13 Apr 2016

Investment Partners

March has been a positive month for risk assets. As soon as mid-February, the Fed started to prepare markets for a softer stance than expected by market participants. Mid-March, it delivered at the FOMC meeting with a downward revision of growth and inflation forecasts for 2016, consolidating the rally in both equities and bonds.

Hedge funds delivered positive returns in March, supported by the bullish market environment and the dovish stance of the Federal Reserve. Year to date hedge funds remain nonetheless in negative territory , though they outperform risk assets on a risk adjusted basis. Fixed income has continued to perform lately but stretched valuations do not support aggressive positions on government bonds. In effect, 10-year bund yields are close to zero as of early April and 10-year Japanese government bond yields are negative.

In this environment, hedge fund strategies with higher directionality such as Event-Driven, L/S Credit and L/S Equity outperformed. In parallel, strategies that are more defensive such as CTAs and Global Macro underperformed. On a YTD basis however, CTAs continue to be in positive territory since their defensive positioning was highly protective at the beginning of 2016. The merger arbitrage strategy is also in positive territory year to date.

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