Hedge Funds Top Broader Markets In March

Apr 4 2011 | 1:01pm ET

Hedge funds made it three-for-three in March to close out the first quarter with gains.

Two industry indices also show that, for the first time in 2011, the average hedge fund had a better month than the Standard & Poor's 500 Index. Still, the average fund is well behind the broader markets for the first quarter.

The Credit Suisse Liquid Alternative Beta Index rose 1.28% last month, while IndexIQ's IQ Hedge Composite Beta Index managed a more modest 0.86%. The former is up 3.08% for the first three months of the year, while the latter is up just 0.93%. By contrast, the S&P 500 rose a microscopic 0.04% in March, but is up almost 6% on the year.

"All four LAB sector indices posted gains as managers profited from a number of diverse strategies which generated positive returns across both equity and credit markets," Jordan Drachman, head of research for alternative beta strategies at Credit Suisse, said. "The LAB Event Driven Liquid Index remains the strongest performing index year-to date, returning 4.39%."

That strategy index rose 1.01% last month, the weakest performance of any LAB index. The strongest was global macro, which added 1.69% (2.03% year-to-date), followed by merger arbitrage at 1.38% (3.74% YTD) and long/short equity at 1.17% (3.58% YTD).

The IndexIQ benchmarks showed emerging markets funds to have been investors' best bet in March with a 2.82% return (down 0.02% YTD). Event-driven funds rose 1.72% (0.9% YTD) and global macro funds 1.12% (1.06% YTD). Long/short equity funds added 0.58% (3.12% YTD).

Fixed-income arbitrage and market neutral funds, on the other hand, took losses last month. The former dropped 1.03% on the month (down 0.4% YTD), while the latter edged down 0.03% (up 0.85% YTD).

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