Hedge funds had the strongest first quarter in more than 20 years, data released Thursday by Hedge Fund Research showed.
The HFRI Fund Weighted Composite index returned 6.1% in the quarter ended March 31, the best performance for a first quarter since 2000.
The report said the second straight quarter of strong performance was driven by "exposure to out of favor, deep value equities, as well as by optimism over the impacts of a broader economic reopening, increased cryptocurrency exposure and increased stimulus spending."
By strategy, the HFRI Event-Driven (Total) index was the top performer, with a return for the quarter at 8.2%, followed by the HFRI Equity Hedge (Total) index, 7.4%; the HFRI Relative Value (Total) index, 3.9%; and the HFRI Macro (Total) index, 3.8%.
"With many equity markets having reached record highs, hedge funds continue to tactically position for fluid macroeconomic and geopolitical developments, with potential for dislocations as a result of dynamic retail trading trends, evolving demand for digital assets, new virus variants and/or financial institution leverage," HFR President Kenneth J. Hines said in a statement accompanying the report. "Funds positioned to opportunistically navigate these powerful and potentially volatile trends are likely to lead industry performance through mid-2021."