Hedge fund titans fight back as larger managers pull ahead in March

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Peter Laurelli eVestments

Larger hedge funds have entered the second quarter on a high after a staging an impressive fightback which saw them generate above-average returns in March after lagging the industry average during the first two months of the year.

The 10 biggest hedge fund managers reporting to eVestment’s database experienced gains of 1.12 per cent in March, compared to an industry average return of 0.83 per cent last month. 

Overall, eVestment’s Hedge Fund Aggregate ended Q1 up 4.92 per cent, outperforming both the Bloomberg Barclays Global Aggregate (-4.46 per cent) and the MSCI World ex-US GD (4.17 per cent), though lagging the S&P 500 (6.17 per cent).

Peter Laurelli, eVestment’s global head of research, describes it as a “fairly strong” three-month period for the industry. He adds the stronger performance numbers from larger managers was a switch from the first two months of the year.

“The 10 largest reporting managers, with a positive performance of 1.12 per cent in March, produced higher average returns than the rest of the industry, which had not been the case in recent months,” Laurelli observes. “However, despite some good signs in March, several of these large products remain in negative territory year to date.”

Each hedge fund sub-strategy was in positive territory on a quarterly basis. The standout performers were activist strategies, topping the first-quarter performance table with gains of 8.57 per cent, and distressed hedge funds, which added 8.28 per cent in the same three-month period. Long/short equity hedge funds also enjoyed a strong start to 2021, rising 7.36 per cent in Q1, as event driven strategies returned more than 6 per cent. Market neutral equity strategies and directional credit funds were both up 4.37 per cent, as multi-strategy funds rose 4.10 per cent.

Although monthly returns proved somewhat muted during March, more than 60 per cent of hedge funds reporting into eVestment’s database were up into positive territory.

Alternative risk premia funds led the way last month, gaining more than 3 per cent, as market neutral hedge funds added 1.75 per cent and long short equity managers gained 1.50 per cent. Distressed-focused strategies (1.33 per cent) and directional credit (1 per cent) were the only other managers to notch up returns of more than 1 per cent, while convertible arbitrage (-0.38 per cent) as origination and financing (-2.55 per cent) slipped into negative territory.

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