Hedge funds gained 0.34 per cent during the month of March, bringing its first quarter performance to a gain of 2.29 per cent, according to the latest Index Flash Update from EurekaHedge.
Underlying markets, as represented by the MSCI AC World Index (Local) gained 0.79 per cent during the month, with first quarter gains of 5.06 per cent.
March was marked by investor scepticism over the Trump administration as proposed healthcare reforms to replace Obama's Affordable Care Act did not meet intended outcomes. This led to an overall cautious sentiment in the market over the administration's ability to deliver reforms in other sectors as promised during Trump's campaign.
Aside from developments in the White House, the Fed has delivered on market expectations by raising the interest rate in March though the pace of interest rate hike remains largely unchanged at an average of three rate hikes for the year.
Outside of the US, the triggering of Article 50 has kick-started the official Brexit process. Strength in the Eurozone inflation rate has also propped up expectations of tightening from the ECB, which could see a convergence of monetary policy outlook for the world’s major central banks in the next 12 months.
Among developed mandates, European hedge funds were up 0.73 per cent, followed by North American peers with 0.48 per cent. On the other hand, Japanese counterparts retracted 0.74 per cent for the month. On a year-to-date basis, European managers reported 2.12 per cent gains followed by North American and Japanese managers who posted returns of 2.10 per cent and 1.15 per cent respectively.
Distressed debt hedge fund managers posted the steepest decline this month, down 1.21 per cent followed by CTA/managed futures and macro mandated hedge funds which retracted 0.77 per cent and 0.18 per cent respectively over the same period.
Emerging market mandates were up a modest 0.60 per cent for the month with strength led by underlying Asia ex-Japan mandates. Frontier markets, as represented by the Eurekahedge Frontier Markets Hedge Fund Index is up 1.50 per cent for the month.
The Eurekahedge Long Short Equities Hedge Fund Index gained 1.07 per cent during the month with strength led by underlying equity long-bias hedge funds which gained 1.51 per cent over the same period. Long/short equities managers outshone other strategic mandates to post the best Q1 2017 returns, with gains of 3.87 per cent.
Asia ex-Japan mandated hedge funds outshone regional peers, gaining 1.57 per cent during the month. Underlying Greater China and India hedge fund managers up 1.82 per cent and 4.36 per cent over the same period respectively. On a year-to-date basis, Greater China and India mandated hedge funds posted impressive gains, up 6.87 per cent and 11.27 per cent respectively.
Among volatility-focused hedge funds, short volatility hedge funds topped the table for March, gaining 1.43 per cent while long-volatility hedge funds posted the steepest decline, down 2.02 per cent. On a year-to-date basis, short volatility hedge funds gained 3.38 per cent while tail risk hedge funds were down 4.74 per cent.
