Global Macro

Macro bets pay off

Discretionary Global Macro managers delivered strong returns this month, top performing trades included FX, Fixed Income, and Emerging Markets. In FX, managers with negative views on the US Dollar expressed against the Japanese Yen, Euro, and Canadian Dollar were profitable. The bearish view on the US dollar was also implemented via long gold positions, which generated significant gains. Trades in US Fixed Income, with front-end receivers and yield curve steepeners, also generated positive returns. In Equities, managers with tactical short US index positions suffered, while those with long positions in European and Asian equity indices gained. In Emerging Markets, local rates receivers, notably in Brazil and Mexico, as well as selected hard currency credit positions were among the best contributors to performance for the month.

Systematic Trading

Gains thanks to Equities and Fixed Income

Systematic trading managers captured powerful trends in global bond and equity markets, buoyed both by the broader risk-on sentiment as well as dovish Central Banks. Traders with long exposure to European sovereign paper were rewarded, as yields fell significantly in Germany, France, and especially Italy. Trend-following strategies in commodity futures had a mixed returns. Long positions in precious metals gained, short energy positions suffered from geopolitical-related reversals, while short base metals positions were negatively impacted by Chinese stimulus measures. Strategies in alternative, less-liquid markets performed well, particularly those in selected OTC credit and commodity markets. Equity statistical arbitrage strategies delivered negative returns, particularly in the US and Europe.

Equity Hedge

Cyclicals lead the way for Alpha capture

Global equity markets rallied strongly in June with renewed optimism surrounding the United States and China’s trade deal, erasing the losses incurred in May. All regions were in positive territory, with cyclical sectors such as Materials, Industrials, and Energy surging past others. Technology and Consumer Discretionary sectors did very well. Biotechnology-focused funds benefited from a sharp rebound in the sub-sector from the previous month. Long Short funds with long exposure to Chinese Equities,  US Technology, and Energy generated outsized gains, with those with exposure to semiconductors in particular benefiting from the ease in global trade tensions.

Event Driven

Activists add value and outperform index

Event Driven strategies performed well this month with managers with Activist and Special Situations strategies in particular driving gains. Activist managers outperformed other sub-indices by far, as gains from some established constructivist positions rallied often in excess of the broader market. Amid the context of a widening of M&A spreads, idiosyncratic developments regarding specific major deals impacted some managers. A setback in timeline of one of the largest pharmaceutical deals created pain for many risk arbitrageurs, while a newly announced merger in the sector created some opportunity for others. Distressed managers benefited from a considerable upward repricing of post reorg equities situations, especially in the oil & gas sector.

Relative Value

Corporate Fixed Income generates returns

Optimism over global central bank dovishness helped support risk-assets and reduce volatility on the one hand and on the other hand reprice interest rates with a continuation of the rally in global bonds.  This environment was particularly supportive for convertible arbitrage managers who retained equity and credit directional exposure but was less favourable for those with delta-hedged strategies. A positive development for the tax treatment of a major stub trade benefited capital structure arbitrageurs. Structured Credit managers were generally up on the month as spreads across most securitised products tightened. Dispersion trades were unprofitable as the spread between index and single stock implied volatility widened.

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June 2019 Report


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