Low beta hedge fund strategies outperform in October turmoil

Low beta hedge fund strategies such as merger arbitrate, relative value arbitrage, long-short equity market neutral and CTAs outperformed in October, when equity markets fell.

The finding on hedge fund performance came from asset manager Lyxor, which runs a managed account platform for hedge fund investing. Over October, equity markets sold off dramatically, based on fears related to the US economy and falling earnings growth, related to trade wars and a slowdown in China’s growth. Lyxor said hedge fund strategies with elevated beta, or based on overall market movements, suffered most in October, but with some outliers for individual strategies. The worst performing strategy was global long-short equity, down 13.5%.

Lyxor said that volatility could remain high, making alternative strategies attractive to investors. It picked merger arbitrage as a strong conviction for the long-run, and CTA and market neutral long-short strategies for investors expecting a recession in the USA.