Lyxor Global Hedge Fund index down -0.45 per cent in April

Date: Thursday, May 21, 2009
Author: Hedgeweek.com

he Lyxor Global Hedge Fund index, an investable index based on Lyxor's hedge fund platform which tracks the overall hedge fund universe, was down -0.45 per cent in April.

Since the beginning of the year the index is flat.

The key drivers for this month's alternative indices returns lay in the stabilizing markets, with improved liquidity and an overwhelming beta-driven rally.

L/S credit (+4.8 per cent) and convertible arbitrage (+1.6 per cent) were leaders among the strategies. Both benefited from a general spread tightening, and new issuance in both markets points toward better liquidity. Convertible valuations improved toward less depressed levels, as evidenced by convertible implied volatility holding steady even as listed option volatility declined on the rally. Distressed managers, still cautiously short, lost out (-3.3 per cent).

CTA managers faced a difficult month. CTAs focused on high-frequency trading posted losses of -0.7 per cent, and CTAs focused on more medium- and longer-term trends declined 1.8 per cent. Longer-term CTAs faced losses on short equity positions. Short-term CTAs found more novel ways to lose money, for example, on long Mexican peso holdings after the swine flu news broke. Global macro managers traded the same markets but posted gains of 1.3 per cent. Nonetheless, returns varied widely among managers.

Within the event driven space, merger arbitrage and special situations managers both posted losses at the index level (-1.7 per cent and -0.2 per cent, respectively). Merger arbitrage managers exposed to capital structure arbitrage trades (e.g., Citigroup preferred vs. common stock) showed more volatility and worse returns than their peers. Special situations managers with highly defensive positions fared worse than managers with deeper value plays that benefited from the prolonged rally.

Long/short equity managers with a long bias posted significant gains (+7.5 per cent), while the more defensively positioned variable bias managers were generally off (-2.3 per cent).

Market neutral funds were down 0.6 per cent, but statistical arbitrage funds nearly broke even with losses of -0.4 per cent.