Hedge fund strategies have been “displaying elevated resiliency” to volatile global markets and “seem well-positioned relative to traditional assets,” said Lyxor Asset Management researchers in a weekly research note.
Hedge funds were not immune to global market sell-offs triggered by the surprise devaluation of the Chinese currency on Aug. 11 and traders’ read of this move as “an additional sign of slower Chinese growth,” wrote Jean-Baptiste Berthon and Philippe Ferreira, both senior cross-asset strategists for LAM, in their research wrapup, released Monday.
Messrs. Berthon and Ferreira noted that the Lyxor Hedge Fund index was down 0.3% in the week ended Aug. 18. Global macro hedge funds, for example, were down 1.2% in the week because of developments in China that affected U.S. dollar valuations, while event-driven strategies were flat.
Longer term, however, the Lyxor index was up 0.2% for the month-to-date Aug. 18 and up 2.8% year-to-date. As of Aug. 18, year-to-date returns of three of the five hedge fund strategies that comprise Lyxor’s index were well above the 0.8% return of the S&P 500: global macro, 4.3%; long/short equity (broad), 4.2%; and event-driven (broad), 1.4%. Lyxor’s CTA Broad index, on the other hand, was down 0.2% and its Fixed Income Broad index was down 0.2%.
“The return of dispersion and the emergence of multiple themes are helping (long/short) equity managers produce strong alpha,” said the researchers in their report. “Macro traders are also benefiting from a flurry of relative value opportunities, thanks to their conservative positioning, and have been able to successfully navigate the markets,” they added.