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HFRI data shows mixed March for hedge funds

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Hedge funds’ performances in March were mixed as bank risk soared amidst instability and dislocations resulting from several bank failures and the acquisition of Credit Suisse by UBS, according to data released by HFRI.

The main HFRI Fund Weighted Composite Index dropped -0.8% for the month, and the investable HFRI 500 Fund Weighted Composite Index lost around -1.2%. Overall, close to half of hedge funds posted positive performance in March.

Equity Hedge funds, which invest long and short across specialized sub-strategies, led strategy gains for the month, with both the HFRI Equity Hedge (Total) Index and the investable HFRI 500 Equity Hedge Index advancing 0.9%. Here, returns were driven by Fundamental Growth and Quantitative Directional sub-strategies, as well as successful short positions in financials.

In contrast, Macro managers suffered the biggest declines in March, as quantitative, trend-following CTA strategies posted sharp losses with contributions from short fixed-income exposures. Overall, the HFRI Macro (Total) Index dropped -3.2%, while the investable HFRI 400 (US) Macro Index was down about -4.1% for the month. Quantitative, trend-following CTA strategies suffered steep losses, with the HFRI 500 Trend Following Index sliding -5.2%, partially offset by the HFRI Macro: Discretionary Thematic Index’s +0.3% rise.

Fixed income-based, interest rate-sensitive strategies endured mixed performances in March, as the Federal Reserve raised interest rates but bond yields declined amid a flight-to-quality resulting from increased Financials risk. The HFRI Relative Value (Total) Index lost around -0.5%, while the investable HFRI 400 Relative Value Index dropped -0.3%.

Event-Driven hedge funds, which often focus on out-of-favour, deep value equity exposures and speculation on M&A situations, lost money as risk in Financials soared. The investable HFRI 500 Event-Driven Index ended the month down an estimated -1.8%, while the HFRI Event-Driven (Total) Index fell some -1.65%.

However, the HFR Cryptocurrency Index continued its strong start to the year, surging +5.2% in March to increase its YTD return to +31.4%. The HFR Risk Parity Vol 15 Index rebounded from a -6.8 decline in February to post a +5.9 gain in March, moving its YTD performance to +7.1%.

Performance dispersion widened for the month, as the top decile of the HFRI FWC constituents advanced by an average of +7.5% in March, while the bottom decile fell by an average of -10.1%, representing a top/bottom dispersion of 17.6%. By comparison, the dispersion of February performance was only 11.3%.

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