HFN: Hedge Funds See Worst Q1 Ever

Apr 10 2008 | 9:48am ET

Hedge fund strategies lost ground in March, contributing to the first negative first quarter performance on record. 

According to the HFN Hedge Fund Aggregate Average, hedge funds and managed futures products fell 1.35% in March. However, despite the overall negative performance for the quarter, Q1 produced the largest quarterly outperformance by hedge funds over equity markets since 2001.

Unlike February when emerging markets and rising commodity prices supported hedge fund outperformance of equity markets, in March the major winners were short biased funds, volatility related options strategies and asset based lending strategies.

The HFN Short Biased Average gained 2.24% in March and was up 11.04% in Q1. Asset Backed Lending funds returned an average of 0.92% in March and  were up 2.30% in Q1, while the HFN Options Strategies Average gained 2.49% in March and  was up 3.04% in Q1.

The drop in non-energy related commodity prices hurt funds in the HFN CTA/Managed Futures Average, which was down 0.71% in March, but was up 7.28% for the quarter.

Energy sector funds also lost ground in March despite natural gas prices rising and oil prices near flat. The HFN Energy Sector Average was down 4.81% in March and fell 6.59% overall in Q1.
Emerging markets experienced a sell-off in March led by funds investing in China, India and the Middle East/North Africa region, which was hurt by funds investing in Turkey. The HFN Emerging Markets Average was -2.36% in March and -4.27% in Q1.

HFN’s newly launched regional and country specific benchmarks show funds investing in China were down 6.13% in March and down 13.28% in Q1, while those investing in India were down 12.52% in March and down 25.49% in Q1.

Distressed strategies had their worst Q1 on record and the worst quarterly result since Q4 2000. The HFN Distressed Average was -1.28% in March and -4.13% in Q1.

The HFN Hedge Fund Aggregate Average is based on the HedgeFund.net database, which consists of over 8,000 hedge fund, fund of funds, and CTA products.

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