Global Macro

A diverse set of performance drivers

Discretionary Global Macro managers positioned for a risk-on environment in the month of April were rewarded. In interest rates, positions in US yield curve steepeners were often among the best performing trades. In credit, a long exposure to European periphery and US government-sponsored enterprises (GSEs) contributed positively while Emerging Markets (notably Argentina) detracted. A steady rally in crude oil prices and global equity indices was beneficial to managers with long positions. Managers with long US dollar exposure against developed Market currencies gained, as did those receiving Australian interest rates.

Systematic Trading

Trend followers outperform

Systematic Trading managers posted a second consecutive month of strong performance, with trend following strategies able to capitalize on clear trends in equities, energy and agricultural markets. The improved risk-on sentiment also resulted in a correction of trends in global bond prices. Commodities proved to be a fruitful supply of returns, with agricultural markets in particular exhibiting consistent direction. Managers were able to capture downtrends in cattle, soybeans, wheat, and coffee markets, with the latter reaching a historical low. The continued rally in crude oil benefited managers with long exposure.

Equity Hedge

Market exposure still key for performance

Equity Hedge managers broadly performed well, with a high level of dispersion of returns. Managers with exposure to Cyclicals, Financials, Technology, Semiconductors and Software outperformed. Managers with long exposure to US Healthcare underperformed as the debate around a single payer system in the US resurfaced heightening policy uncertainty. Some managers benefited from a rebound in Airlines, while those with a value bias continue to lag. Although managers have been able to deliver strong returns from stock-picking, market exposure remains a significant driver of performance. Managers’ net and gross exposures have normalized since the beginning of the year and higher levels of risk are being deployed.

Event Driven

Risk-on environment benefits Event Driven managers

Event Driven managers continue to perform well. Special Situations was the top performing strategy, benefiting from the broader risk-on environment as well as developments in idiosyncratic positions. Activists gained thanks to high directional exposure to large cap and defensive sectors. Distressed managers performed well, and structured credit managers also contributed positively, continuing to benefit from the carry as well as the rally in Puerto Rico muni bonds. Exposure to Emerging Markets brought some volatility this month, managers with long exposure in Latin America in particular suffered. Port-reorg equity strategies gained partly thanks to the broader rally in equity markets. Positive developments regarding  restructuring in specific names provided an uplift to those with long exposure.

Relative Value

Convertible bond arbitrage strategies continue to drive gains

For a fourth consecutive month Relative Value ended the month in positive territory, with every sub-strategy contributing to gains. Managers with a focus on convertible bond arbitrage benefited from continued strong issuance and the friendly risk-on environment. Structured credit portfolio gains were helped by positive carry against a relatively calm market backdrop. Corporate credit strategies gained from the relative outperformance of lower vs higher-rated securities, while Sovereign Fixed Income Arbitrage strategies also contributed positively. Volatility overall had bottomed-out mid-month to reach year-to-date lows, to the detriment
of Volatility Arbitrage strategy opportunity sets.

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