Bears and bulls in Q3, says Lyxor
07 October 2014 Paris
Image: Shutterstock
Hedge funds ended the week beginning 29 September in negative territory, concluding a tough quarter for alternative strategies, according to a report from Lyxor Asset Management.
The performance drivers of Q3 were once again running at full tilt however, with Lyxor citing “choppy equity markets, credit spreads widening, and a strong US dollar among weaker commodity prices”.
Head of research for Lyxor, Philippe Ferreira, said: “Most recently trends have been very profound on [foreign exchange] and commodity markets, whilst in the last few years equities have proven to generate most of the gains.”
“This shows that selecting the right hedge fund strategy, adapted to a given market environment, is key to generating uncorrelated alpha.”
On the positive side, Lyxor has noted a pick-up in performance on systematic strategies: commodity trading advisor-managed funds (CTAs) and long/short market neutral are now the best performing strategies on a year-to-date basis, thanks to a strong Q3.
CTA gains were made on foreign exchange positions, especially on the short exposure to the euro. Commodities added to the gains thanks to the established short exposure on the cluster.
Lyxor has pointed out that short-term CTAs, with an average higher risk budget allocated to equity indices, “suffered from the sector and from trading around quick market movements, whereas long-term funds stuck to longer trends in equities, but also in rates”.
The outperformance came also from commodities where, by construction, medium-term funds have a higher allocation.
The performance drivers of Q3 were once again running at full tilt however, with Lyxor citing “choppy equity markets, credit spreads widening, and a strong US dollar among weaker commodity prices”.
Head of research for Lyxor, Philippe Ferreira, said: “Most recently trends have been very profound on [foreign exchange] and commodity markets, whilst in the last few years equities have proven to generate most of the gains.”
“This shows that selecting the right hedge fund strategy, adapted to a given market environment, is key to generating uncorrelated alpha.”
On the positive side, Lyxor has noted a pick-up in performance on systematic strategies: commodity trading advisor-managed funds (CTAs) and long/short market neutral are now the best performing strategies on a year-to-date basis, thanks to a strong Q3.
CTA gains were made on foreign exchange positions, especially on the short exposure to the euro. Commodities added to the gains thanks to the established short exposure on the cluster.
Lyxor has pointed out that short-term CTAs, with an average higher risk budget allocated to equity indices, “suffered from the sector and from trading around quick market movements, whereas long-term funds stuck to longer trends in equities, but also in rates”.
The outperformance came also from commodities where, by construction, medium-term funds have a higher allocation.
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