Lxyor: Hedge Fund Index Up 0.4% As Risk-On Returns

May 2 2017 | 9:37pm ET

Hedge funds successfully navigated the first round of the French elections, according to Lyxor Asset Management's most recent Weekly Brief, and have since shifted back into a risk-on mode. 

The Lyxor Hedge Fund Index was up +0.4% for the week through April 25, the company noted, bringing its year-to-date gain back up to 0.9%. 

The company’s Event-Driven Broad Index was a standout during the period, gaining +1.2% largely on the strength of special situations funds that thrived from European investment exposure. CTAs also posted gains, rising a welcome +1% on exposure to equities and ending several weeks of weak performance. For the year to date, the two measures are up +4.2% and down -2.1%, respectively.

Global Macro funds, meanwhile, dipped -0.2% as relative value trades on equities and short European bond positions led the bulk of gains, counteracted by longstanding short EUR and long oil positions. 

Markets and hedge funds were also supported by an upbeat earning season, Lyxor noted in the research report. “In Europe, the fading political risk benefitted most reporting companies, with less regards to their fundamentals,” said Lyxor senior strategist Philippe Ferreira. “We expect the stock-picking environment to improve as investors refocus on companies’ fundamentals and on the European recovery.

“In the U.S., in-line earning announcements no longer suffice to translate into meaningful stock performance,” Ferreira added. “Expensive valuations and high Q1 earnings expectations are spurring more acute fundamental discrimination. In contrast with Europe, fund managers make do with more modest market contribution, but they benefit from better alpha prospects. This should support neutral U.S. funds and longer bias L/S Equity funds in Europe.”

Lyxor’s Weekly Brief aims to identify trends in hedge fund investing while leveraging the proprietary information accessible through the company’s managed account platform.

Lyxor’s Hedge Fund indices are based on the universe of funds available on the platform determined on a monthly basis to be eligible for inclusion. Participating funds represent $10.3 billion of assets under management and replicating $220 billion in AUM as of March 31, 2017.

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