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Hedge Funds Post Second Consecutive Monthly Loss

Hedge fund performance measured by the Preqin All-Strategies Hedge Fund benchmark has fallen for the second consecutive month in March.

The index fell 0.63% last month, while only the emerging market hedge fund, credit strategies, volatility and Brazilian Real benchmarks posted positive results with returns of 0.10%, 0.15%, 0.15% and 0.85%, respectively.  Despite the overall loss, the gains made in January still put hedge fund performance in positive territory at 0.35% for the first three months of the year. The twelve month return also remains strong at 8.02%

The data shows that event driven hedge funds posted the largest losses of all top-level strategies, ending the month down 1.49%. This marks the benchmark’s worst monthly performance since January 2016 (-3.16%).

Amy Bensted, head of hedge fund products at Preqin, told AlphaWeek: “The start of 2018 has posed many challenges for fund managers, with markets globally seeing some significant swings and the macro environment looking quite different to previous years. The impact of President’s Trump escalation of trade restrictions on China, and the corresponding response of the government of China, has led to a selloff in markets across the globe. This coupled with other major events, in particular the Facebook and Cambridge Analytica scandal, as well as a broader drop off on prices in the tech sector, has resulted in many hedge funds to be hit with losses.”

The question now is how hedge fund managers respond to the significant price swings at the start of the year.

“Many funds will be positioning their portfolios more defensively and looking for non-correlated exposures in the current environment. With investor concerns around a market correction growing, hedge funds that can provide some protection on the downside are attractive in 2018,” she said.

However, the overall hedge fund industry is still considered to be generally positive with a positive start to the year and outlook from both managers and allocators.

Bensted added: “The performance wobbles at the start of the year are obviously a concern, but the long term outlook for hedge funds continues to be strong as investors are looking for assets that can add an element of defensiveness to their portfolios.