CTA and macro managers are winners of Fed week
21 September 2015 Paris
Image: Shutterstock
A lack of guidance by the Federal Reserve following its meeting on 17 September has played into the hands of global macro and commodity trading advisor (CTA) managers, according to Lyxor’s Weekly Brief.
The indecisive stance, which saw the Federal Reserve decided against raising interest rates, has damaged risk assets, while bonds have rallied and the US dollar has eased against major currencies, which will fuel global macro and CTA managers, according to Lyxor.
The report, by Lyxor’s managed account platform research team, analysed hedge fund flows, performance and positioning, and found that markets were brought to a standstill last week ahead of its latest meeting.
Hedge funds were flat and there was little dispersion in returns across the managers.
Event-driven outperformed as equity volatility edged lower. Meanwhile, fixed income strategies underperformed as sovereign bond yields moved higher.
Systematic funds are well positioned, being neutral equities and long fixed income. These funds also cut their long US dollar positions, especially against the euro, during the summer.
But there are discrepancies between the positioning of short-term and long-term CTAs.
The former have less directionality in foreign exchange and commodity markets and appear to be better suited to capture any benefits from the new market regime. In fact, long-term commodity traders are still long in US dollars and short in commodities.
The Federal Reserve’s stance is likely to put downward pressure on the US dollar and some upward pressure on commodities.
Furthermore, Lyxor found that the Federal Reserve’s lack of guidance over future interest rate moves could result in higher risk aversion despite this dovish stance.
“In the long/short equity space, we maintain our strong preference for market neutral and variable bias strategies. Some managers in that space have delivered double-digit returns year to date and we expect this trend to continue.”
The indecisive stance, which saw the Federal Reserve decided against raising interest rates, has damaged risk assets, while bonds have rallied and the US dollar has eased against major currencies, which will fuel global macro and CTA managers, according to Lyxor.
The report, by Lyxor’s managed account platform research team, analysed hedge fund flows, performance and positioning, and found that markets were brought to a standstill last week ahead of its latest meeting.
Hedge funds were flat and there was little dispersion in returns across the managers.
Event-driven outperformed as equity volatility edged lower. Meanwhile, fixed income strategies underperformed as sovereign bond yields moved higher.
Systematic funds are well positioned, being neutral equities and long fixed income. These funds also cut their long US dollar positions, especially against the euro, during the summer.
But there are discrepancies between the positioning of short-term and long-term CTAs.
The former have less directionality in foreign exchange and commodity markets and appear to be better suited to capture any benefits from the new market regime. In fact, long-term commodity traders are still long in US dollars and short in commodities.
The Federal Reserve’s stance is likely to put downward pressure on the US dollar and some upward pressure on commodities.
Furthermore, Lyxor found that the Federal Reserve’s lack of guidance over future interest rate moves could result in higher risk aversion despite this dovish stance.
“In the long/short equity space, we maintain our strong preference for market neutral and variable bias strategies. Some managers in that space have delivered double-digit returns year to date and we expect this trend to continue.”
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