Macro managers suffer from a bearish view on the dollar
September turned out to be negative for Global Macro managers. In FX, losses were mainly generated from long positions in the euro, British pound and Australian dollar against the US dollar. A consolidation in gold and silver prices was also detrimental. In rates, managers suffered from a flattening of European and UK yield curves. Emerging Markets specialists experienced a difficult month too, negatively affected by the restructuring of Ecuador, Argentina debt trading down and local rates positions.
Equity Hedge managers outperform equity indices
Equity Hedge managers outperformed the various equity market indices in September, and offered decorrelation and significant alpha benefits. Energy, financials and communications were the worst sectors in September, while industrials and materials, held up the best, but also ended in negative territory. Managers reduced their momentum factor bias and continued to build positions in areas of the economy hit by Covid-19.
Volatility and Convertible Bond arbitrage strategies benefit from the volatility spike in markets
Relative Value posted another good month, providing uncorrelated returns, during a challenging and volatile month for risky assets. Within Sovereign Fixed Income, volatility arbitrage continued to generate healthy gains. Convertible bond arbitrage continues to be supported by robust issuance of new paper, though to a lesser extent than in prior months. Structured Credit outperformed equity and corporate returns. SPAC was another good source of returns.
A pick-up in the M&A activity supports Merger Arbitrage managers
Merger arbitrage specialists posted solid performance in September. Activity increased, but spikes in volatility as we get closer to the US Presidential Election and Brexit could be detrimental to the pick-up in M&A activity. Event Driven credit managers recorded mixed performance with credit spreads widening and prices weakening. Uncertainty surrounding a possible US stimulus package was also a headwind. Managers with a more multi-strategy approach performed better while credit oriented managers suffered small losses.
HF Flash Report
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