Market conditions have been supportive since early July, but the flattening of the Treasury curve raises questions about the probability of a U.S. recession next year. Fund manager surveys suggest investors have erred on the side of caution lately...

Market developments in May saw some trend reversals across the fixed income and commodity space. On the one hand, the unfolding of the Italian political crisis coincided with a rebound of U.S. Treasuries during the second half of May. On the other hand...

Market volatility also played out, as well as the growing share of jumbo deals, usually more sensitive to adverse developments. Amid very supportive conditions for M&A (from the tax reform in particular), weaker deal rationales are also mentioned as a greater source of deal volatility.

Unstable market conditions were supportive for hedge funds, in relative terms. Liquid hedge fund benchmarks were down -1% in March, with Distressed and Special Situations strategies underperforming. On a positive note, low beta strategies did well.

We think it is time to strengthen L/S Neutral funds allocation. While they faced months of challenging transversal stock rotations, we expect their environment to improve for several reasons.