13 Jul 2011
The Lyxor Global Hedge Fund index, an investable index based on Lyxor’s hedge fund platform which tracks the overall hedge fund universe, was down -2.1% in June in a globally challenged hedge fund environment. Year to date performance is down -1.9%.
The prices for risk assets lurched lower over the first half of June 2011. Macro data was not awful and did not signal contraction, but it was far below expectations and gave investors a nasty surprise. When the macro data stabilized a bit, the political situation regarding the European debt crisis provided further took center stage. When the “muddle through” confidence vote and austerity votes in Greece passed, many (but not all) risk assets rebounded again. The sharp, violent nature of the rebound was its defining characteristic: the year-to-date performance of the S&P 500, for example, was a puny 1.5% in Mid-June but was a robust 6.0% at the end of the month.
The long decline (beginning last May) and quick rebound caught many strategies off-guard. Trend-following CTAs, represented by the Lyxor Long-Term CTA Index, had turned short equities and long bonds and consequently suffered during the last part of the month. The Index declined 2.7% on the month for a year-to-date performance of -5.9%. The Lyxor Short-Term CTA Index declined 1.2%. The Lyxor Global Macro Index declined 2.9% (down 4.4% year-to-date). Bullish managers with long exposures to commodities, especially grains, were hardest hit.
The Lyxor Convertible Arbitrage Index declined 0.6% on the month (up 1.1% on the year). The L/S Credit Index declined 0.9% (up 1.3% on the year). High Yield in the US and Europe sold off sharply mid-month but regained much of the loss at the very end of the month, similar to the story for stocks. Some of the best performing credit funds were ones with a global scope; they benefited from idiosyncratic gains in Latin American debt that offset losses elsewhere. The Fixed Income Arbitrage Index gave back the gains on the year and fell 2.2% on the month.
The Lyxor Merger Arbitrage Index declined 1.3% (up 1.7% on the year), whereas the Special Situations Index declined 3.7% (down 4.1% year-to-date). Merger spreads were fairly resilient over the month. Special Situations funds suffered from heavy positions in energy, financials, and basic materials, sectors loading heavily onto risk factors that flared up in the month. The Distressed Fund Index declined 1.2% for a 1.0% year-to-date gain, with notable losses coming from positions in financials.
Long/Short Equity managers gave back some of the year’s gains despite having moved into more defensive positioning (i.e., lower gross and net exposures). The L/S Long Bias Index declined 2.3% (up 0.3% on the year), and the Variable Bias Index declined 0.9% (up 2.0% on the year). Even managers with little net directional exposure found difficulty getting traction: The Market Neutral Index fell 1.5% and the Statistical Arbitrage Index fell 1.0%. Declining trading volumes and sector rotations provided headwinds to managers looking to add alpha through stock selection.
The prices for risk assets lurched lower over the first half of June 2011. Macro data was not awful and did not signal contraction, but it was far below expectations and gave investors a nasty surprise. When the macro data stabilized a bit, the political situation regarding the European debt crisis provided further took center stage. When the “muddle through” confidence vote and austerity votes in Greece passed, many (but not all) risk assets rebounded again. The sharp, violent nature of the rebound was its defining characteristic: the year-to-date performance of the S&P 500, for example, was a puny 1.5% in Mid-June but was a robust 6.0% at the end of the month.
The long decline (beginning last May) and quick rebound caught many strategies off-guard. Trend-following CTAs, represented by the Lyxor Long-Term CTA Index, had turned short equities and long bonds and consequently suffered during the last part of the month. The Index declined 2.7% on the month for a year-to-date performance of -5.9%. The Lyxor Short-Term CTA Index declined 1.2%. The Lyxor Global Macro Index declined 2.9% (down 4.4% year-to-date). Bullish managers with long exposures to commodities, especially grains, were hardest hit.
The Lyxor Convertible Arbitrage Index declined 0.6% on the month (up 1.1% on the year). The L/S Credit Index declined 0.9% (up 1.3% on the year). High Yield in the US and Europe sold off sharply mid-month but regained much of the loss at the very end of the month, similar to the story for stocks. Some of the best performing credit funds were ones with a global scope; they benefited from idiosyncratic gains in Latin American debt that offset losses elsewhere. The Fixed Income Arbitrage Index gave back the gains on the year and fell 2.2% on the month.
The Lyxor Merger Arbitrage Index declined 1.3% (up 1.7% on the year), whereas the Special Situations Index declined 3.7% (down 4.1% year-to-date). Merger spreads were fairly resilient over the month. Special Situations funds suffered from heavy positions in energy, financials, and basic materials, sectors loading heavily onto risk factors that flared up in the month. The Distressed Fund Index declined 1.2% for a 1.0% year-to-date gain, with notable losses coming from positions in financials.
Long/Short Equity managers gave back some of the year’s gains despite having moved into more defensive positioning (i.e., lower gross and net exposures). The L/S Long Bias Index declined 2.3% (up 0.3% on the year), and the Variable Bias Index declined 0.9% (up 2.0% on the year). Even managers with little net directional exposure found difficulty getting traction: The Market Neutral Index fell 1.5% and the Statistical Arbitrage Index fell 1.0%. Declining trading volumes and sector rotations provided headwinds to managers looking to add alpha through stock selection.
