French asset manager Lyxor’s hedge fund index finished March up by 0.3%, with nine out of 11 indices ending the month in positive territory.
The firm’s LS [long/short] Equity Long Bias Index and its Fixed Income Arbitrage Index were the best performers, up 2.3% and 2.1% respectively.
Lyxor attributed the growth to macro economic themes such as monetary policy meetings, minutes and speeches by the European Central Bank and the Federal Reserve. The content was more dovish then expected and provided a boost to risky assets.
However, ‘commodity trading advisor’ (CTA) funds were described as the “main drag in March” as they lost out partly due to the oil rally. CTAs started March with their energy exposure cut by half and a long position in metals. The funds were caught out by the violent rebound in oil prices.
A drop in bond yields until mid-March, engineered by a dovish Fed, was the other main source of losses.
The firm surveyed US hedge fund managers and found that sentiment was improving as funds increased their exposure to the consumer and housing-related sectors. However, in Europe, sentiment was more mixed, as a number of uncertainties kept them cautious and reluctant to take bold stances.
“Equity dispersion remains robust, correlations plunged. The EPS [earnings per share] season, unlikely to bring major surprises, could mean more fundamental pricing. This is favorable for L/S Equity funds,” said Jean-Baptiste Berthon, senior cross asset strategist at Lyxor.
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