Macro hedge funds surged to lead industry-wide gains in March, completing a record Q1 by again posting sharp returns as financial market volatility was exacerbated by skyrocketing inflation, rising interest rates and expectations for continued increases, and escalation of the Russian military conflict in Ukraine.
The investable HFRI 500 Macro Index surged +6.25 per cent in March, extending its Q1 2022 return to +10.0 per cent, with strong contributions from Commodity, Fundamental Discretionary, and Quantitative, trend-following strategies. The investable HFRI 500 Fund Weighted Composite Index advanced +2.4 per cent for the month, extending its Q122 return to +0.85 per cent, topping the decline of the Nasdaq by nearly 1000 basis points.
The HFRI Fund Weighted Composite Index (FWC) added +1.9 per cent in March, according to data released today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. Through the volatile Q122, larger funds outperformed smaller and mid-sized funds, with the HFRI Asset Weighted Composite Index jumping +3.5 per cent in March and leading all top-level composite indices for the quarter with a +3.0 per cent return.
The performance dispersion of the underlying HFRI index constituents expanded in March, with the top decile of the HFRI gaining an average of +12.8 per cent, while the bottom decile declined by an average of -6.0 per cent for the month, representing a top-bottom dispersion of 18.8 per cent. Through the first quarter, the top decile of the HFRI has surged an average of +24.3 per cent, while the bottom decile has declined by an average of -15.4 per cent.
Macro strategies delivered strong outperformance in March and for Q1, posting negatively-correlated gains as equities declined in January and February, while producing positively-correlated returns in March as equities recovered. The investable HFRI 500 Macro Index surged +6.1 per cent in March, the highest monthly return since inception, bringing Q1 performance to +10.0 per cent, which is also a record quarter.
The HFRI Macro (Total) Index vaulted +5.5 per cent for the month. Macro sub-strategy gains were led by the investable HFRI 500 Macro: Commodity Index, which surged +18.1 per cent in March, also a record monthly gain, as commodities spiked on inflation fears and supply disruptions tied to the Russian invasion of Ukraine; the Index produced a quarterly record return of +35.7 per cent. Quantitative, trend-following Macro sub-strategies also led as the HFRI 500 Macro: Systematic Diversified Index spiked +6.7 per cent for the month, also a record monthly gain, bringing the Q122 return to +11.3 per cent.
The HFRI FOF (S) Risk Mitigation Index surged +2.0 per cent for the month and +3.7 per cent for Q122.
Equity Hedge funds, which invest long and short across specialized sub-strategies, also advanced in March, with both the investable HFRI 500 Equity Hedge Index and the HFRI Equity Hedge (Total) Index returning +0.8 per cent for the month. EH sub-strategy performance was led by the HFRI EH: Quantitative Directional Index, which gained +2.9 per cent, while the HFRI EH: Healthcare Index added +1.8 per cent.
Event-Driven strategies, which often focus on out-of-favor, deep value equity exposures and speculation on M&A situations, also advanced in March, led by higher beta Distressed and Multi-Strategy exposures. The HFRI Event-Driven (Total) Index returned +0.8 per cent for the month, while the investable HFRI 500 Event-Driven Index added +0.3 per cent. ED sub-strategy gains were led by the HFRI 500 ED: Multi-Strategy Index, which advanced +1.5 per cent in March, and the HFRI 500 ED: Merger Arbitrage Index, which added +0.7 per cent.
Fixed income-based, interest rate-sensitive strategies posted mixed performance for the month as interest rates increased led by shorter dated maturities, with shorter dated yields rising above longer dated as the US yield curve inverted. Both the investable HFRI 500 Relative Value Index and the HFRI Relative Value (Total) Index gained +0.4 per cent in March, with RVA sub-strategy performance led by yield alternatives and volatility funds. The HFRI RV: Yield Alternatives Index and HFRI RV: Volatility Index each advanced +1.9 per cent for the month.
The HFRI Diversity Index posted a gain of +1.2 per cent in March, while the HFRI Women Index advanced +0.55 per cent.
