Lyxor: CTAs and Macro Managers Outperforming in Challenging Environment

Oct 5 2015 | 6:49pm ET

Hedge funds were generally down in the third quarter and continue to face challenging market conditions, according to the latest weekly briefing from Lyxor Asset Management. 

The Lyxor Hedge Fund Index (HFI) was down -1.5% for the week to September 29, compared to a 3% nosedive in the S&P 50 driven partly by adverse developments in the health care sector. In this environment, hedge fund performance was broadly negative, with only CTAs posting positive returns, up 0.5%.

Macro managers also continued to outperform as a result of their long positions on Fixed Income, booking an essentially flat -0.3% loss. L/S Equity managers were resilient, although U.S. managers suffered in comparison to their European and EM counterparts. 

Event-Driven funds were down sharply as a result of their exposure to the health care sector, which tumbled after democratic presidential candidate Hillary Clinton hinted that she would introduce price curbs on the sector if elected next year. 

L/S credit funds went down last week in dire market conditions, and concerns about global economic growth remain high. The Fixed Income Broad index lost 0.7% and L/S Credit Arb lost 0.4%. 

For the third quarter, the HFI was down 3.6%, while the S&P suffered its most severe drawdown (-8.2%) since the third quarter of 2011. For the year to date, the HFI is down 1.8%, while Event-Driven leads the losers with a 6.3% loss. Long-Short Equity remains the leader with a 1.2% gain as the fourth quarter begins.

Lyxor believes CTA and Macro strategies will continue to perform well, while recent economic data should continue to support Fixed Income. Lyxor also does not believe investors should decrease their exposure to Event-Driven funds after the sharp pharma-related drawdown.

“Health care names have partly recovered since the hit a few days ago,” noted Lyxor head of research Philippe Ferreira, “The sector is among the few that have not experienced a downward revision in near term earnings expectations. The sector is immune to China’s growth deceleration and to the recent slump in commodity prices.”

The Lyxor Hedge Fund indices are based on the universe of funds available on the Lyxor Managed Account Platform determined on a monthly basis to be eligible for inclusion. Approximately 66 funds participate on the platform, representing $7 billion of assets under management and replicating $200 billion in AUM.

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