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Hedge Fund Performance Poor In March

Hedge funds fell in March, but overall performance for the first three months of the year was still in positive territory. Relative value strategies were the only ones to produce positive returns in March as equities and interest rates declined, according to a note from Hedge Fund Research (HFR).

HFRI Relative Value Total Index returned 0.02 in March with the HFRI RVA: Fixed Income Asset Backed Index leading with way with returns of 0.48.

The overall poor performance from hedge funds was driven by a decline in global equities amid increasing trade and tariff tensions, according to HFR.

However, while the HFRI Fund Weighted Composite Index posted a decline of 0.25% in March it was still up 0.35% for the first three months of the year, topping the declines of the DJIA, S&P 500, and most European and Asian regional equity market indices.

Macro hedge funds were the hardest hit in February and March with losses of 3.5% and 0.18%, respectively. The HFR Macro Total Index has declined 0.98% in the first three months of the year.

Indexes that performed really well in March included the HFRI EH: Sector - Energy/Basic Materials Index with an upswing of 1.01% although it is still down 0.72% in the first three months. The HFRI ED: Activist Index was up 2.09% in March although it also remains down 1.01% for the first quarter. The HFRI Emerging Markets: MENA Index was up 1.64% in March pushing its quarterly performance to 6.56%.

Kenneth J. Heinz, President of HFR, said in a statement: “March and the first quarter of 2018 have already defined a significantly divergent financial market and hedge fund performance environment than prior years, with the shift and volatility punctuated by escalation of trade and tariff politics and economics.

“As most equity markets declined, hedge funds quickly adapted to low and non-correlated exposures across asset classes, and to capital protection and preservation positions, en route to producing a first quarter gain. It is likely that these trends will not only continue, but accelerate into mid-year, driving uncorrelated gains and industry capital growth.”