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Special Situations and L/S Equity recovered last week, says Lyxor


The rebound in equity markets supported hedge funds last week, with strategies with elevated beta such as such as Special Situations and L/S Equity, outperforming, according to the latest Weekly Brief from Lyxor’s Cross Asset Research team.

Market Neutral rebounded due to the slight rebound in momentum and quality stocks.
 
By contrast, CTAs underperformed. The slide in energy prices and the depreciation of the EUR and JPY vs. USD were the main headwinds to trend followers. However, their long but moderate positions on equities managed to alleviate part of the losses.
 
Market players continued to pump money into Alternative UCITs funds in February, adding EUR3.2 billion to the asset class.
 
After an exceptional 2017 vintage (EUR57 billion), the cumulated Assets under Management (AUMs) of the industry reach EUR389 billion. The strong pace of inflows suggests that the quest for diversification and risk mitigation is growing among investors, in a context where traditional asset classes remain richly valued. Additionally, hedge funds demonstrated again in February their ability to outperform their underlying benchmarks during market jitters.
 
Within strategies, Multi-strategy, Fixed Income Arbitrage and L/S Equity gathered the bulk of
 
Market players reshuffled their allocations into Alternative UCITs strategies towards US assets in February.
 
In that regard, they rebuilt their positions on Event Driven and US L/S Equity. With EUR268 million in February, US L/S Equity enjoyed their largest inflows since April 2014. Alpha conditions remained supportive in the US amid a shifting fiscal regime, strong sector dynamics and buoyant corporate activity, creating a favourable playground for stock pickers. Meanwhile, Merger Arbitrage delivered uncorrelated returns during the February’s sell off.
 
By contrast, CTAs and L/S Market Neutral saw outflows last month, in line with their poor results.
 
Global Macro continued to attract massive flows, especially if compared to their AUMs +3.6 per cent.

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