Asset classes choppy in February, says Gam report
07 March 2013
By Asia Asset Management
Gam released its monthly hedge fund performance update on Wednesday (March 6), revealing that February proved to be a choppy month across many asset classes. The month began with some price trends from January continuing, such as equities broadly rallying and the Japanese yen weakening further. Markets then reversed and consolidated, driven by concerns around the Italian elections and the release of the US Federal Open Market Committee meeting minutes. The meeting minutes showed an unusually large number of committee members questioning the efficacy and risks associated with continued large-scale quantitative easing. Currencies continued to be volatile, with sterling weakening materially, the Japanese yen consolidating but weakening slightly over the month, and the trade-weighted US dollar index regaining some of its safe-haven appeal – ending up 3.5% for the month. The MSCI World index gave up its early gains and ended the month marginally positive, whereas the Barclays Global Aggregate Bond index was down 0.9%, both in US dollar terms. On the macroeconomic front, expectations for Europe remain anchored around zero percent real growth rates, while US data continued to be reasonably solid with housing leading the way.
Hedge fund managers in aggregate produced a second positive month for the year. The HFRX Global Hedge Fund index finished the month up 0.4% and is now up 2.4% year-to-date. At the HFRX hedge fund strategy index level, performance was flat to positive for each of the four main strategies of equity hedge, relative value, event driven strategies and global macro/CTA.
Anthony Lawler, portfolio manager at GAM, said: “Many asset classes consolidated in February. The big macro theme coming into the month was Japan-centric, with a number of managers short the Japanese yen, long the Nikkei equity index and short Japanese government bonds. This theme worked well in January, but in February it was volatile and lost some momentum. However, we continue to see currencies deliver attractive trading opportunities, with the US dollar a popular long position and shorts in both sterling and the euro were beneficial to some managers. The prospect of so-called friendly competitive devaluation of currencies by export-led countries may deliver trading opportunities for discretionary global macro managers. Furthermore, there are more idiosyncratic trading opportunities as medium-term correlation measures across asset classes continue to decline.”
The choppiness in markets in February is not yet being taken as a sign to take risk off, said Mr. Lawler. “While the underlying tone to positioning is still bullish, some overstretched areas of the market underwent a natural pull-back. Hedge fund managers are certainly cognisant of the risks of slowing growth in China, the unresolved issues in Europe, and further fiscal retrenchment in the US from sequestration. But despite these risks, managers in general continue to hold positioning that implies their belief that risk markets will trade on fundamentals this year. This means that managers are seeing opportunities in areas such as currencies, commodities and equity markets.”
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