Summer's Most Common Hedge Fund Theme Is the Global RecoveryBy
Hedge fund positions more neutral ahead of summer: Lyxor AM
CTA funds long equities, global macro long Europe over U.S.
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:
- 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
- Substantially reduced overall net exposure through taking profits in healthcare, tech
- Remain balanced between cyclical and defensive sectors