eVestment: Hedge Funds Return +2.29% in March, Best Month in Two Years

Apr 8 2016 | 10:40pm ET

The hedge fund industry produced the best aggregate performance in two years during March, according to eVestment’s latest Hedge Fund Performance Report, with the company’s Hedge Fund Aggregate rising +2.29% during the period.

Nearly 70% of hedge funds produced positive returns in March, eVestment noted. For the quarter, the industry's overall return remains negative at -0.41%, but is a far cry from the disastrous results seen by many industry participants during the first several weeks of the year. The quarterly loss was the industry’s first negative Q1 since 2009 and only its second on record, eVestment said.

Other key insights from the report:

  • Activist hedge funds, increasingly in the news lately as a result of several high-profile activist engagements, produced their best monthly performance in March since 2010. Gains from the concentrated, equity/capital structure-focused funds of +5.35% were enough to bring Q1 2016 into positive territory.
  • Credit hedge funds sharply rebounded from a prolonged drawdown to return an average of +3.47% in March. March returns were the best for credit funds since September 2009.
  • Prior to March, credit hedge funds had declined -8.14% during this drawdown, which has lasted twenty months, and lost nearly 7% in the last eight months. During the financial crisis, credit fund’s losses were larger, -12.74%, yet occurred in a five-month span. The difficulties credit strategies have faced in recent months have been significant, and rival their most difficult period on record.
  • Emerging market hedge funds returned +7.50% in March and ended Q1 2016 at +1.58%. Russia, Brazil and India funds all produced double-digit returns, while funds focused on China also saw a positive return of +5.08%, which while good, paled in comparison to its BRIC brethren.
  • The major influence on emerging market returns in March, which were near record highs, was a rebound in energy and other commodity prices. However, as of this writing, oil prices have since reversed course and downward pressure on oil has resumed, which may impact returns going forward. 
  • Commodity hedge funds, which have enjoyed a return of positive investor sentiment in recent months, returned an average of +1.38%. Q1 returns of +1.64% put the universe ahead of most market segments for 2016, except FX and financial derivatives where most managed futures funds operate.
  • On the downside, managed futures strategies saw average returns of -1.76% and belie the prevalence of large losses during the month. 
  • Return dispersion remains wide. The differential between average gains and losses of 753 basis points is one of the largest in many years, rivaled recently only by the distribution of returns in January. This all illustrates the fact the industry is operating in a highly volatile set of markets, and in doing so, producing a wide dispersion of returns. For the year, 52% of the industry is positive, with average gains of +4.77%.

Atlanta-based eVestment was founded in 2000 by Jim Minnick, Matt Crisp and Heath Wilson. The company boasts one of the largest, most comprehensive global databases of traditional and alternative strategies and provides institutional investment data intelligence and analytic solutions to clients worldwide.

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