Lyxor: Slight March Setbacks, But Reduced Geopolitical Risk

Stockholm (HedgeNordic) After predictions of a strong March for Hedge  Funds following a 0.8% increase in its first week, the Lyxor Hedge Fund  index is signalling a marginal setback due to macro, merger and credit  funds lagging.
Macro funds’ USD exposure fell by a third due to long Emerging Markets  FX positions prior to the FOMC. Merger funds fell behind due to  non-Merger & Acquisitions energy positions, with credit funds hemorrhaging returns on broader energy spreads.
Conversely, strategies most exposed to risk assets benefitted from  encouragement stemming from global growth and Trumpian reflation, with  limited U.S. rates and dollar headwinds for the time being. The majority  of Long/Short equity funds were on the rise, particularly those focused  on Emerging Markets, while CTAs were also up due to marked equity  exposure.
In a comment to the geopolitical risks ahead, Lyxor’s cross asset  research team assessed that, “the success of the moderates in  Netherlands only had a marginal impact on the Eurozone risk premium.  Spreads in French, Italian and periphery govies barely changed, just  like banks’ credit spreads. Hedge fund managers are not expecting a  disruptive change in the French political chessboard (and hence in  Europe). They are keeping most of their long exposures. Meanwhile, they  maintain hedges through lower exposure to financials, indices shorts,  Euro shorts, and/or a relative preference for Northern European assets. In other words, while keeping a tail-risk protection, most managers  remain positioned for a valuation catch-up once the French (and Italian)  political uncertainty faded.”
Picture: (c) Aleksandar Mijatovic—shutterstock.com
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About Author

Glenn W. Leaper, Associate Editor and Political Risk Analyst with Nordic Business Media AB, completed his Ph.D. in Politics and Critical Theory from Royal Holloway, University of London in 2015. He is involved with a number of initiatives, including political research, communications consulting (speechwriting), journalism and writing his post-doctoral book. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in English and a BA in International Relations.

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