Volatile markets impact the performance of Systematic managers
October was a neutral month Global Macro managers. Markets proved to be relatively choppy but volatile across most asset classes. As a result, systematic managers suffered from the reversal in equity markets during the last week of the month. Developed Markets-focused funds benefited from a steepening of the US yield curve and a net receiving stance in European fixed income. A thematic short US dollar positioning generally detracted from performance. Emerging Markets macros generated profits from a thematic short EM FX exposure.
A good month, but challenging in the last week for the Equity Hedge managers
Equity Hedge managers fared relatively well in October despite giving back most of the gains at the end of the month. During the last week a sector rotation has taken place outside the technology and health care sectors ahead of the US elections. Alpha came from the short side that worked well and the manager's long portfolio that held up better than their markets of reference. From a regional standpoint, October was led by the Asian funds, followed by US and Europe focused managers.
The Convertible Bond arbitrage strategy continues to drive the performance
Relative Value managers posted a modestly positive month, albeit continuing to provide uncorrelated returns. Convertible managers continued to generate gains despite revaluation and issuance taking a bit of a breather, while SPAC trading detracted from performance. In Structured Credit, down-in-credit securitized products underperformed high yield, and in Equity Volatility short medium-term US Vega positions incurred losses as the worries surrounding the election pushed volatility higher.
The encouraging overall pick up in M&A activity continues in October
Event Driven managers posted mixed results in October. Credit and structured credit continue to be solid sources of P&L for Event Driven multi strategy funds. The encouraging pick-up in M&A activity continued in October and M&A specialists are increasing dry powder to take advantage of potential volatility ahead. Equity-based Special Situations and Activists managers saw most of their early-on October gains fading over the second half of the month.
HF Flash Report
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