Mutual Funds Hedge Bets as Poll Shows Narrow French Election – Institutional Investor

Mutual funds are strengthening defensive positions ahead of
the first round of the French presidential election, despite
Thursday’s rally in financial markets.

Portfolio managers say the likelihood of a
larger-than-expected majority for an anti-European Union
candidate remains too high to ignore, even amid narrowing
government bond spreads, rising French stocks and a strengthening Euro Thursday.
They’re using defensive hedges such as short sales and put
options to help protect their holdings should far-right
candidate Marine Le Pen and far-left candidate Jean-Luc
Mélenchon advance to the second round.

In an interview, Etienne de Merlis, chief investment officer
at Signia Wealth, said he has witnessed an increase in the
number of short-dated put options being traded on the Eurostoxx
over the…

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