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Hedge funds recover from stock sell-off


Hedge funds recovered strongly last week from the recent stock selloff, with two exceptions: fixed income funds, flat this week; and neutral equity funds, still suffering from sector and factor rotations.

The risk-on sentiment though broadly supported hedge funds last week, with the Lyxor Hedge Fund Index up 1.4 per cent.
 
The more directional strategies outperformed. The L/S Equity variable bias index was up 1.2 per cent, fuelled by solid returns from Emerging and the highest beta- driven funds.
 
Special Situations funds outperformed from several of their hard-catalyst stocks delivering strong earnings. Merger Arbitrage thrived from their M&A positions, including the NXP vs Qualcomm deal.
 
Finally, CTAs outperformed as they captured some of the equity recovery, despite their recent derisking. They also benefitted from the rise in US bond yields and the rebound in energy prices.

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