LONG SHORT EQUITY

We are positive on this strategy, in which we continue to look for managers that perform on long and short sides. We continue to favour managers with low net exposure.

We are mindful of the risks represented by exogenous shocks such as possible policy changes,more specifically so in the case of US healthcare.

Europe continues to look more compelling in terms of valuation and central bank actions, on the back of the recent positive signs of economic growth.

 

GLOBAL MACRO

The Fed’s decision to postpone a potential rate hike has fuelled uncertainty across the market regarding the strength of US economic growth. The higher level of volatility has created a more challenging environment for the strategy. We remain cautious in this space.

 

QUANT STRATEGIES

Some specific Systematic strategies have been powerful contributors in recent months on the back of trends across oil, rates and FX, among others. In the market-neutral quantitative arbitrage space, performances continue to be positive, albeit weaker than over the past couple of years. We are looking closely at some factors (value, momentum, growth), as this space has become more and more crowded through both alternative strategies and 130/30 long-only products.

We are looking actively at 4 managers that could bring diversification both at strategy and at portfolio level.

 

FIXED INCOME ARBITRAGE

The increasing activity of the Central Banks coupled with the decline of banks’ proprietary desks’ activity have been positive for the strategy to a degree in 2015.

 

EMERGING MARKETS

Emerging markets continue to be challenged:

  • The transition towards a domestic-demand-driven economy is just getting started, especially in China. The recent turmoil proves that GDP growth remains fragile and that activity is exhibiting hiccups in this transitioning phase.
    • Of course, the situation differs greatly from country to country. In some cases, key rates oversight is very effective, while other countries that are highly dependent on foreign-currency funding sources are being stretched to the limit due to cash repatriation.
    • Our managers, benefiting from FX/rate dislocations, have been able to navigate.

 

RISK ARBITRAGE - EVENT DRIVEN

  • While we believe that this strategy continues to make sense, its net long bias nevertheless puts it at risk in cases of strong market disruptions, as witnessed over August and September.
  • M&A volume has hit its best year for deals by value since 2007 and spreads are more rewarding.

 

DISTRESSED

The distressed debt offer is still extremely limited for the time being. We do not see any immediate opportunities in this strategy. Nevertheless, the energy sector where massive issuance has taken place over the recent years may soon become an attractive pool of opportunities given the massive disruption in oil prices and its impact on these securities.

 

LONG SHORT CREDIT & HIGH YIELD

Although the US market has been more challenged than Europe, we remain confident that yield-chasing has not vanished, despite more uncertainty and the likelihood of an increase in the default rate, especially in the US.

  • We are less active in this space, being more in favour of equity-related strategies. We prefer managers looking for idiosyncratic investments.

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