Tech downturn hit Event Driven & L/S Equity
• The Lyxor Hedge Fund Index took a pause, down -0.5%, with 2 out of 9 Lyxor indices recording positive results.
• CTAs outperformed on the back of solid diversified positions. Long allocations to EU bonds, U.S. equities & energy provided them with tailwinds.
• Market Neutral L/S Equity managers were not left unscathed by multiple rotations. Their sensitiveness to the momentum risk factor was the largest detractor, as those stocks faltered.
• Event Driven funds gave back some of their gains. The widening of M&A deal spreads and sector rotations hurt both Merger Arbitrage & Special Situations funds.
“The tech sector is a pivotal component of most themes, indices and quantitative factors. It was tested over the recent weeks, dragged by fiscal uncertainties, profit-taking, and worries about the Chinese tech demand.
We expect the sector to receive more support in the form of greater tech Capex and steady external demand. In China, the engineered economic slowdown is a threat to its tech demand, but the transition toward higher consumption and a rise in the supply chain should be a support. The sector - just like the others - is rich, but merely reflects margin expansion. Despite a troubled few days we don’t see a compelling case to sell.”
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