From Deutsche Asset & Wealth Management*
Equity special-situation-orientated managers and those running moderate net exposures (i.e. with long and short exposures to the market that are roughly in balance) continue generally to fare better than their credit and more directional peers. Within the merger-arbitrage sector, we prefer nimble and smaller managers which can operate within the small- to mid-cap segments of the equity market. Headline deals’ spreads remain tight and a significant amount of capital is being put to work there. On the positive side, the mergers-and-acquisitions (M&A) spree is now
expanding at full speed to Europe. Strategies based around this approach weathered last month’s more volatile conditions reasonably well.
With the MSCI World price-to-earnings multiple at around 18 and with such strategies historically relatively insensitive to overall market movements, any benefits from overall market gains are likely to be somewhat muted. As the start of the Fed hiking cycle is in sight, we would suggest that managers focusing instead on value sectors of the market should be favoured. The equity trading environment continues to be favorable for arbitrage-orientated managers based on fundamental factors. The current earnings season and the possible start of the U.S. rate-hiking cycle are also contributing to increasing differentiation in single stocks’ and sectors’ performance.
*an extract from “Deutsche Asset & Wealth Management CIO View September 2015″ – Liquid Alternatives