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Digital Subscriptions > The Hedge Fund Journal > Issue 139 – Mar 2019 > Lyxor Chenavari UCITS

Lyxor Chenavari UCITS

Nimble alpha from liquid credit

The Lyxor Chenavari UCITS has received The Hedge Fund Journal’s ‘UCITS Hedge’ award for best performing credit long/short strategy (Europe) over 2017 and 2018. Lyxor’s fast-growing UCITS platform (and its AIF platform) have also been recognised in our awards. The fund pursues a broadly market neutral corporate credit strategy with maximum long or short exposure targeted to work out at plus or minus 2% NAV sensitivity for a 10% move in credit spreads. It has been lowly correlated to corporate credit indices and has minimal interest rate sensitivity while currency risk is hedged. Returns are intended to come mainly from name picking, security selection and alpha generation rather than big beta bets. The return target is 5% through a full cycle but could be more in an opportune year like 2017, when it made +7.38% in the USD class. Correspondingly, it could be less in a more challenging year like 2018, when it made +0.67%.

Since its relaunch in February 2016, the strategy has surpassed its return target and delivered a Sharpe ratio of over two. The volatility target of around 3% has been consistent with maintaining moderate leverage of 350-450% gross exposure. The short book, at 200-300%, appears to be notionally bigger than long book exposure around 150%, but once adjusted for credit beta the two sides are comparable. “The aim is to preserve capital and limit downside in all market environments,” says co-PM, Demian Brasil.

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