Global Macro

The rally across risk assets fuels the performance of EM focused managers

With muted moves in DM Fixed Income and FX markets, June was a relatively quiet month for the Global Macro strategy. In Fixed Income, positive contributions came from the receiving positions at the front-end of the European swap curve, in FX from a bearish view on the US dollar against DM counterparts and from a long exposure to gold.

In contrast, residual short equity index positions, notably in Europe, and hedges were a drag on performance. Overall, EM-focused macros funds outperformed their DM peers, notably thanks to short Latam FX trades and selected long EM sovereign credits.

Equity Hedge

Asia focused managers continue to outperform

Equity Hedge managers benefitted from a supportive equity backdrop with favourable exposure to Momentum, Growth, Technology, Consumer Discretionary and Asia. The Information Technology sector continued to performed well, while the Energy sector was negative in most geographies. The market’s rotation towards Value names in late May did not last long into June, as Growth resumed its trend mid-month to end with a significant outperformance. Healthcare recovered towards the end of the month, but still ended it in negative territory. On average, American Equity Hedge managers outperformed the US Equity index, while Asian focused managers were the top performers.

Relative Value

A robust primary market supports convertible and municipal managers

Relative Value managers continued to post positive performances across assets and strategies. Managers benefitted from spread tightening and risky assets continued to rally on the back of better than feared economic data. Cyclical sectors and assets down the capital structure rallied strongly. Thus, Structured Credit managers had a very good month overall. Robust primary market activity helped convertible and municipal managers to post strong return. Regarding volatility managers, dispersion strategies was a significant driver of return as the realised volatility of individual stocks exceeded that of the index.

Event Driven

Credit strategies lead gains for Event Driven managers

Event Driven credit managers continued to benefit as the May rally extended into June. Net long activists and special situations managers benefitted to a certain degree from beta tailwind, even though flows more than fundamentals tend to drive markets between earning seasons. Within merger arbitrage, activity remains muted and we are seeing an above-average number of deal collapses. However, while many buyers continue to try to get out of their agreements it was refreshing to see Tech Data deal closing. Spreads remain elevated compared to historical standards, but continue to come in vs March highs, offering the trade-off between attractive spreads and heightened deal break risk.

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