Hedge funds have suffered the worst start to the year since 2011.
The HFRI Fund Weighted Composite index, for example, returned 1.1% in the quarter ended March 31, compared to first-quarter returns of 3.6% in 2013, 4.7% in 2012, and 1.7% in 2011, according to data from Hedge Fund Research, which produces the index.
First-quarter 2014 returns of other major hedge fund indexes also were low compared to previous years, led by the 1.5% return of the Hennessee Hedge Fund index, and followed by the Barclay Hedge Fund index, 1.4%; Preqin All Hedge Fund Strategies index, 1.2%; Eurekahedge Hedge Fund index, 0.9%; and the Lyxor Hedge Fund index, 0.5%.
The eVestment database's Hedge Fund Aggregate return was 1.2% for the three-month period.
“The mood entering 2014 was buoyant for the hedge fund industry, following two back-to-back years of double-digit returns,” said Amy Bensted, Preqin's head of hedge funds products, in the researcher's first-quarter hedge fund performance report.
“However, the first quarter of 2014 has been one of mixed results,” Ms. Bensted added.
The HFRI Hedge Fund index, for example, was down 0.5% in January, up 2% in February, and down 0.3% in March.
“Global equity markets experienced their version of March Madness as fears of Russian expansionism, (Federal Reserve) tightening and slowing growth in China spiked intra-month volatility,” said Sol Waksman, founder and CEO of BarclayHedge, which compiles the Barclay Hedge Fund index.
“Diversification over macro and micro themes, relative value, in-depth alpha extraction and capital preservation are key allocation focuses. This is the exact hedge funds' job spec,” wrote Jean-Baptiste Berthon, senior cross-asset strategist at Lyxor Asset Management, in the firm's April industry barometer report. Lyxor compiles the Lyxor Hedge Fund index.
Despite the $6.5 billion performance-related net decline in March of eVestment's Hedge Fund Aggregate, the research firm estimated that quarter-end assets totaled $2.931 trillion, barely trailing the industry's $2.938 trillion peak on June 30, 2008.