Hedge funds advanced again in March, concluding a first quarter that saw gains in all three months and adding to a period of extended positive performance that has seen industry returns climb for five consecutive months and 12 of the last 13 months, according to data released by HFR.
The HFRI Fund Weighted Composite Index (FWC) advanced +0.24 per cent for the month, topping the March performance of both the S&P 500 and DJIA.
The March gain extends the HFRI FWC Index Value to 13,252, the fourth consecutive monthly record. For 1Q17, the HFRI is up 2.3 per cent, compared to the 0.6 per cent decline in the volatile 1Q16.
for the third consecutive month, equity Hedge (EH) led industry performance with strong contributions from technology, fundamental growth and healthcare strategies, as US equities posted mixed performance in March. The HFRI Equity Hedge (Total) Index climbed +0.64 per cent for the month, bringing the 1Q gain to 3.62 per cent, leading all main strategy performance for 2017. EH sub-strategy returns were led by the HFRI EH: Technology Index, which was up 2.7 per cent for the month and extends its 2017 gain to 5.60 per cent. The HFRI EH: Fundamental Growth Index was up 1.2 per cent in March, increasing its YTD performance to 5.61 per cent, which trails only healthcare as the leading area of HFRI sub-strategy YTD performance. The HFRI EH: Healthcare Index added 1.1 per cent for the month, extending its YTD performance to +6.73 per cent, leading all HFRI sub-strategies.
Fixed income-based relative value arbitrage (RVA) strategies also gained in March, despite the increase in US interest rates by the US Federal Reserve. The HFRI Relative Value (Total) Index climbed +0.53 per cent, bringing YTD performance to +2.5 per cent and extending the streak of consecutive monthly gains to 13 months. RVA sub-strategy performance was led by Volatility strategies, with the HFRI RV: Volatility Index gaining 2.1 per cent, increasing its YTD return to 2.6 per cent. Credit multi-strategy funds also posted gains in March, as the US Federal Reserve increased interest rates, with the HFRI RV: Multi-Strategy Index advancing 0.33 per cent.
The HFRI Event-Driven (Total) Index was essentially flat in March, posting a narrow gain of 0.01 per cent, as positive contributions from Merger Arbitrage and Special Situations strategies offset declines in Distressed funds. The HFRI ED: Merger Arbitrage Index advanced 0.42 per cent and the HFRI ED: Special Situations Index added 0.34 per cent for the month, while the HFRI ED: Distressed Index declined 0.9 per cent in March. For the year, special situations leads ED performance with a 3.2 per cent return.
The HFRI Macro (Total) Index declined 0.48 per cent for the month, as gains in currency strategies were offset by declines in commodity and CTA strategies. The HFRI Macro: Currency Index surged 2.7 per cent in March, bringing YTD performance to 3.7 per cent, leading all macro sub- strategies. The HFRI Macro: Systematic Diversified/CTA Index declined 1.35 per cent for the month, while the HFRI Macro: Commodity Index lost 0.37 per cent, lowering first quarter performance for each of these indices into negative territory, at -1.1 and -0.01 per cent, respectively.
"Hedge funds gained in March as the Federal Reserve proceeded with a widely anticipated interest rate increase concurrent with a weakening of the Trump trade, and as US equities concluded a strong first quarter with mixed performance in March," says Kenneth J Heinz (pictured), president of HFR. "In a similar manner to the 2016 intra-year market cycles that were driven by Brexit and the US election, 2017 financial market performance is likely to be driven by similar intra-year cycles, including upcoming European elections, with these contributing to and creating opportunities for hedged long/short strategies across different asset classes. Funds positioned for this environment are likely to lead industry growth and performance in 2017."
