Global Macro

EM focused managers rebound in April

The Global Macro strategy was positive in April. Managers overall maintain a tactical trading approach but remain negative on equities. On the DM-focused discretionary side, long gold, long the Australian dollar and rate receiving positions in the front-end of Europe were among the best contributors. EM-focused managers rebounded well following severe losses in March, supported by a normalisation of market conditions in EM sovereign credit and local rates. Selected short EM FX positions also performed well. Systematic managers reduced portfolio exposure after the volatility spike across markets experienced over the course of the previous month. Managers biased towards priced-based signals fared much better than systematic macro managers relying on fundamental input to generate signals.

Equity Hedge

Equities rally fuels long/short managers’ returns

While the very first days of April were a continuation of March’s selloff, markets massively rebounded in the second week as investor sentiment shifted more positive driven by global interventions from governments and central banks to support their economies. Equity hedged managers, particularly those with a technology focus, benefitted from both their residual equity sensitivity as well as resilient earnings relative to expectations for their underlying long positions. A lower long Growth and Short Value bias can be observed. In terms of alpha, things recently normalised and on average alpha remains positive for the year. In terms of region, Asian managers were the best performers followed by the US and Europe, which is also true on a YTD basis.

Relative Value

Fed driven markets supported Fixed Income Managers

Relative Value strategies performed well in April. Liquidity injection globally together with Fed measures announced in March stabilised fixed income markets and dampened volatility across the board. Relative Value managers who suffered heavily in March recovered, albeit partially. Managers entering March with dry powder and suffering single-digits losses were able to add risk at very attractive levels and generally reversed a significant portion of March’s losses. Fixed Income managers performed well as they benefitted fully from the normalisation of the market brought about by the Fed.  Convertible arbitrage managers posted positive returns thanks to a recovering underlying market and to new issues which hit the primary market at attractive terms.

Event Driven

Spread tightening supports M&A managers’ performance

April was positive for Event Driven managers. Credit managers were able to recoup some of March’s losses, but structured credit, energy and lower quality credits trailed the market rally that was led by higher quality outperformance. A few managers took advantage of dislocations within the corporate and structured credit high quality space. Equity-sensitive Event Driven managers such as activists posted solid gains, benefiting from the rebound in equities. Within merger arbitrage, despite a slowdown in activity and elevated deal break risk, managers benefited from spreads’ tightening following the almost unprecedented move in March.

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