Summer's Most Common Hedge Fund Theme Is the Global Recovery

  • Hedge fund positions more neutral ahead of summer: Lyxor AM
  • CTA funds long equities, global macro long Europe over U.S.

Hedge Funds Took a Hit in June

Investors positioned for the global recovery are in good company: it’s the most common bullish investment theme for hedge funds this summer, according to Lyxor Asset Management.

As interest in hedge funds rises again -- they saw the biggest jump in demand among asset classes examined in a Credit Suisse Group AG report last week -- Lyxor strategists including Jean-Baptiste Berthon set out current investment trends in a recent note.

Fund positions are “somewhat more neutral” ahead of the summer, they said, in particular to themes such as Chinese stability and a tightening Federal Reserve. However, different hedge fund types show a range of sensitivities to other market motifs such as recovering oil prices, U.S. reflation and increasing global inflation.

Here’s a summary of the positions of four types of hedge funds, according to Lyxor:

Macro Funds

  • Arbitraging Europe versus the U.S. using long equity, short bond positions
  • Using short euro positions as a hedge, recently turned net long U.S. dollar
  • Long energy and agricultural contracts

CTA Funds (managed futures)

  • Remain structurally long equities in most regions, rebuilding bond exposures especially in Europe
  • Short U.S. dollar, mainly against non-Group-of-10 currencies
  • Short energy and agricultural contracts

Long/Short Equity Funds

  • U.S. funds increasingly sector-balanced though long financials
  • European funds reduced long financial positions, rotating toward communication, industrial stocks

Event-Driven Funds

  • Substantially reduced overall net exposure through taking profits in healthcare, tech
  • Remain balanced between cyclical and defensive sectors
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