![]() Liquidity has hence been key to navigating this year’s market. ![]() However, considering the high speed of market movements that we experienced in March, the performance that managers printed during the last 2 months reflected their pre-crisis positioning, the level of concentration of their investments and their ability to tactically adjust their portfolio to the current reality. Discretionary managers were able to benefit from short-term tactical trades and made money receiving rate positions in selective EM countries and from being long equity indices. Performances were relatively dispersed but, overall, positive for Global Macro managers, with discretionary strategies generally outperforming systematic investment programmes. Good stock-pickers will be able to select winners and losers. Long Short Equity strategies are, in our opinion, an interesting strategy to consider for navigating the current market environment, since they can modulate their risk appetite and generate returns from their long and short positions in a very wide range of investment themes. Finding a solution to the current crisis is therefore not a binary call that can be solved overnight. It will take some time for corporate management and investors to gain more visibility on the real impact that social distancing measures will have had on revenues and will be dependent on many variables (e.g., government social distancing rules going forward, finding a treatment, the success of stimulus measures, additional epidemic waves). Sustainable and ESG-driven strategies, although still relatively fresh topics in the alternative space, seem to be gathering momentum and to be exiting the crisis strengthened. LS Equity strategies are well positioned to benefit from investment thematics in the technology and healthcare spaces. Due to high levels of macro uncertainty, market breadth is low, concentrating winning trades on a low number of stocks and themes. On average, gross and net fund exposures decreased during the month due to managers selling longs into the rally and covering short positions. Low net exposure and market-neutral strategies hence tended to underperform directional equity funds. This was mainly due to the strong rebound brought about by short covering low-quality stocks on short books. However, considering the strong equity market returns, the upside capture ratio was relatively weak. LS Equity strategies were, on average, positive. ![]() The HFRX Global Hedge Fund EUR gained +2.47% over the month. In Europe, the focus is on Italian sovereigns, where, despite the ECB’s efforts, borrowing rates remain volatile, continuing to trend upwards. ![]() US Investment Grade and short-term High Yield issue spreads, supported by the Federal Reserve programmes, rallied strongly. Rebounds in southern Europe equity indices, UK large caps and in Japanese and Hong Kong equity indices were more modest, posting a positive mid-single-digit performance.Ĭredit, especially in the US, made a strong comeback. The Argentinian Merval Index was up +34.28% while the S&P 500 Energy sector returned close to 30% versus +12.68% for the S&P 500 Index. Aggressively sold markets also rebounded strongly. As usual, the biggest equity moves took place in North America, with the Nasdaq 100 and Nasdaq Biotech Indices up around +15% over the month. Uncertainty regarding the economic impact of the shutdown is still very high and, also, the impacts generated by changing consumer trends have yet to be quantified.Įquity indices – driven by investor flows flocking to technology and healthcare thematics, equity short-covering and massive liquidity injections – rebounded strongly during the month. It may seem puzzling that, after a market crisis without precedent, some parts of the market are almost back at pre-crisis levels even though visibility is as low as before. ![]()
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