Hedge funds post mixed performance in March, HFR reports

Hedge funds posted mixed performance in March as global equities declined on increasing trade and tariff tensions, data from Hedge Fund Research showed.

The HFRI Fund Weighed Composite index posted -0.25% for March. But the index still finished in positive territory for the quarter, advancing 0.35%.

"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," said Kenneth J. Heinz, president of HFR in a news release.

Fixed-income-based relative value arbitrage was the only main strategy that produced positive returns in March, as equities and interest rates both declined. The HFRI Relative Value (Total) index posted a narrow gain of 0.02% for the month. In the quarter, the HFRI RVA index gained 0.84%, leading all HFR main strategy indexes, while the HFRI RVA (Asset Weighted) index jumped 1.43%, as larger credit multistrategies posted stronger returns.

Relative value arbitrage strategies' monthly and quarterly performance was led by the HFRI RV: Fixed Income-Asset Backed index, which gained 0.5% in March and 2.3% in the first quarter. Volatility strategies returned 0.12% in March, although the index ended the quarter down 1.4%.

The HFRI Equity Hedge (Total) index posted a decline of 0.31% in March. The index gained 0.7% for the quarter, topping most equity market indexes globally. Equity hedge performance in March was led by energy and technology funds, with the HFRI EH: Energy/Basic Materials index gaining 1%, while HFRI EH: Technology added 0.3%.

For the quarter, the HFRI Tech index jumped 5.1% and the HFRI EH: Healthcare index added 2.8%, with the former effectively doubling the first quarter gain of the Nasdaq Composite index. The HFRI EH: Multi-Strategy index also advanced 2% for the quarter.

"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," Mr. Heinz added. "It is likely that these trends will not only continue, but accelerate into midyear, driving uncorrelated gains and industry capital growth."