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Weekly Brief: Spike in Oil spawns moderate loss

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Weekly Brief: Hedge funds helped protect portfolios in June

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Hedge funds suffered a blow in June, with the Lyxor Hedge Fund Index down 2 per cent. The industry is nonetheless outperforming traditional asset classes in a context in which the correlation between equities and bonds is positive. In June, the MSCI World was down 2.6 per cent and sovereign benchmarks were down on both sides of the Atlantic (the 10-year Bund price is down 2 per cent; 10-year Treasury price down 1.7 per cent).


Philippe Ferreira

Head of Research – Managed Account Platform

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Hedge funds suffered a blow in June, with the Lyxor Hedge Fund Index down 2 per cent. The industry is nonetheless outperforming traditional asset classes in a context in which the correlation between equities and bonds is positive. In June, the MSCI World was down 2.6 per cent and sovereign benchmarks were down on both sides of the Atlantic (the 10-year Bund price is down 2 per cent; 10-year Treasury price down 1.7 per cent).

 

CTAs underperformed last month, down 4.8 per cent for the full month, on the back of long exposures to both equities and bonds. The rising correlation between both asset classes since May has had negative implications for the strategy. However, after a severe drawdown in Q2 we believe the worst is behind us and we maintain the slight overweight stance expressed a couple of weeks ago (we were neutral over the course of Q2).

 

Meanwhile, L/S Equity strategies were fairly resilient in June, down 1 per cent, with market neutral and variable biased strategies outperforming as expected. Long biased Asian L/S managers suffered a severe blow recently, being down 10 per cent in June. We turned cautious on such strategies precisely a month ago and would advise to stay away for now.

 

Finally, Event-Driven strategies underperformed last week in line with our recent recommendation to reduce the exposure to the strategy. Despite the recent flurry of deal announcements, which may present opportunities, deal spreads are vulnerable to the declining global risk appetite. We believe we will find attractive entry points at a later stage in Q3.

Click here to download the full report

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