Lyxor Asset Management

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Event Driven Extended Their Steady Progress

• The Lyxor Hedge Fund Index was flat, with 7 out of 10 Lyxor indices in positive territory.
• Merger Arbitrage managers outperformed within Event Driven. Macro players witnessed strong intra-month moves. CTAs ended in positive territory, while Global Macro managers delivered uninspiring returns.

Political risk seems to have shifted from Europe to Americas. Allegations that Trump may have sought to influence the FBI regarding an investigation of one of his former advisor further dented in reflation expectations in the US. In parallel, Brazilian assets came under pressure after allegations of bribery against president Temer were released in the press. Political worries temporarily sent markets risk-off, and pushed participants towards safe havens. It triggered a rally in DM sovereign bonds, with the US and German 10-year bond yields tightening. US dollar moved in sync with yields, weakening against major currencies, especially EUR. Equities reflected currencies moves: FTSE100 outperformed S&P500 and Eurostoxx600. Gold and oil ended roughly flat, despite strong intra-month moves. The OPEC agreement proved not sufficient to sustain the oil rally.

Hedge fund performances were disparate across strategies in May. Event Driven funds extended their winning streak, while Macro strategies underperformed on the back of long positions on the USD and on hard commodities. The other hedge fund strategies delivered positive returns.

Event Driven funds extended their steady progress in May. Merger Arbitrage managers outperformed Special Situations. A number of M&A deal positions paid off as spreads narrowed. That included investments on NXP Semiconductors, Straight Path Communication and Syngenta to name a few. On the Special Situations side, the strong earnings season bolstered returns for several core positions such as Sotheby’s, Baxter International and Willis Tower Watsen. Yet, investments in energy and financial sectors partially offset these progresses. Event Driven funds continued to increase their net exposure to equities, with a preference for US equities. The strengthened exposure to Europe resulted from individual stock opportunities. Managers were not taking a macro bet on the euro-zone recovery.

L/S Equity funds delivered mixed and heterogeneous results. The tilt towards cyclicals vs. defensives proved detrimental for most of managers. The most variable managers led the pack, supported by the still positive momentum in equities. On the flip side, market neutral funds, which have a longer term horizon and a stronger focus on value, underperformed. In terms of portfolio positioning, US funds decreased their net long exposure to equities amid fading US growth momentum. European managers strengthened their allocation on financials and consumer cyclical on the back of the strong economic upturn.

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Head Office
Tours Société Générale
17 Cours Valmy
Paris La Défense
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Parent Company:
Société Générale
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