Macro

Sovereign credit and local rates market support EM focused managers

Global Macro strategy recorded a strong 2020. Long global equity index positions continued to produce gains in December, and a selective exposure to technology and energy was also a source of profits. In FX, managers kept on benefiting from a thematic short US dollar view. DM rates were mixed while emerging-market-focused managers were supported by a rally across EM sovereign credit and local rates markets. Risk allocation to commodities increased.

Most systematic managers ended the year strongly. Solid gains in FX, commodities and equities overwhelmed a modest loss in fixed income.

Equity Edge

Technology focused managers generated alpha on both sides of their portfolios

Major equity indices reached all-time highs at the end of December, with emerging markets outperforming the most developed regions. From a factor standpoint, small cap, cyclicals and growth fared better than large cap, defensive and value. Hedge fund specialists in the Tech and Consumer Discretionary space generated more alpha on both the month and the year than generalist equity hedge managers.

Event Driven

A solid month for hard catalyst

In December special situation equity managers benefited from the positive tailwind of strong equity markets. Hard catalyst event driven managers have been fuelled by robust M&A activity, mainly across the US and Europe. A significant number of new deals were announced in December. Credit managers benefited from a cyclical recovery amid vaccine optimism and stimulus expectations driving yields lower. Lower-quality credit outperformed and helped distressed managers.

Relative Value

The trends continue to benefit Relative Value strategies

Relative managers delivered strong performance, with gains generated across most sub-strategies and asset-classes. Within sovereign fixed income, heavy derivative volume stemming from macro managers continued to provide arbitrage opportunities. Convertible arbitrage managers finished the year on a strong note as convertible bonds outperformed all other assets classes. SPACs continued to rally, equity volatility and dispersion arbitrage continued to be challenging for managers as realized volatility dropped and as single stock volatility underperformed that of the index.

HF Flash Report

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