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HFRI GAINS IN MARCH, CONCLUDES STRONGEST 1Q FOR HEDGE FUNDS SINCE 2006
Macro leads in March as quantitative, trend-following CTA’s advance; Risk Parity surges on credit, equity exposures
CHICAGO, (April 5, 2019) – Hedge funds advanced in March, led by Macro and CTA strategies, concluding the strongest first quarter for industry performance since 2006, according to data released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry. The HFRI Fund Weighted Composite Index® gained +1.0 percent for the month, bringing the 1Q19 performance to +5.9 percent. Risk Parity strategies surged in 1Q19 with the HFR Risk Parity Vol 15 Index advancing +14.9 percent, the strongest quarter since index inception.
Macro strategies led hedge fund performance in March as US interest rates fell, driving the HFRI Macro (Total) Index return to +2.1 percent for the month and bringing 1Q19 performance to +2.9 percent. Macro sub-strategies were led by the quantitative, trend-following HFRI Macro: Systematic Diversified/CTA Index, which surged +3.6 percent for 1Q, the strongest monthly gain in 14 months. CTA gains were concentrated in fixed income exposures, as the US Federal Reserve indicated slowing of interest rate increases and interest rates fell throughout the month. Similarly, trend-following risk premia strategies also advanced in March, as the HFR Bank Systematic Risk Premia (BSRP) Trend Following Index jumped +5.94 percent. The HFRI Macro: Multi-Strategy Index added +2.0 percent for the month. Emerging Markets hedge funds also posted strong gains for both March and 1Q, as the HFRI Emerging Markets (Total) Index surged +1.7 percent for the month and +7.8 percent for the quarter. EM performance was led by the HFRI EM: Asia ex-Japan Index, which added +4.3 percent in March and +12.0 percent for the quarter.
Risk Parity strategies surged in March and 1Q, as the HFR Risk Parity Vol 15 Index returned +4.2 percent for March and +14.9 percent for the quarter, concluding the strongest quarter since index inception The HFR Risk Parity Vol 10 Institutional Index added +3.0 percent in March and +10.5 percent for 1Q. Multi-Asset gains also drove the HFR BSRP Multi-Asset Index performance to +11.4 percent for the month.
The HFR Cryptocurrency Index posted its second consecutive monthly gain for the first time since 2017, adding +5.4 percent in March after surging +11.1 percent in February. The HFRI Equity Hedge (Total) Index advanced +0.7 percent in March and +7.9 percent for the quarter, as investor risk tolerance and global equity markets recovered from steep 4Q18 declines. The HFRI EH: Healthcare Index led EH sub-strategy performance for both March and 1Q, advancing +2.2 and +13.2 percent, respectively, topping strong equity market gains for 1Q. The HFRI EH: Fundamental Growth Index also posted strong performance, surging +9.3 percent for 1Q.
The HFRI Relative Value (Total) Index added +0.5 percent in March and +3.8 percent for the quarter. RVA sub-strategy performance was led by the HFRI RV: Yield Alternatives Index, which gained +2.8 percent in March and +11.05 percent for 1Q; the HFRI RV: Convertible Arbitrage Index added +5.6 percent for the quarter.
The HFRI Event-Driven (Total) Index advanced +4.25 percent for the quarter, inclusive of a narrow decline of -0.04 percent in March. Both Activist and Special Situations exposures detracted from March performance, as the HFRI ED: Activist Index fell -1.0 percent and the HFRI ED: Special Situations Index lost -0.5 percent for the month. For the quarter, ED sub-strategy performance led by Activist funds, which surged +8.3 percent.
“Risk-on sentiment dominated both hedge fund and global financial market performance in the first quarter of 2019, marking a sharp reversal from the risk-off sentiment which dominated the fourth quarter of 2018. Hedge fund performance benefitted from strong global equity markets and late-quarter fixed income gains, also navigating ongoing trade negotiations and Brexit developments to realize the strongest first quarter since 2006,” stated Kenneth J, Heinz, President of HFR. “Defensive Macro strategies led industry-wide gains in March to conclude the quarter, following impressive gains in 4Q18 as equity markets posted steep losses. Similarly, Risk Parity strategies, which experienced a challenging 2018, registered a strong recovery in 1Q. It is likely that funds which have successfully navigated the reversal in risk tolerance and market paradigms of the last two quarters will lead industry performance and attract investor capital in 2019.”
Comments reference Flash Update performance figures as posted on April 5, 2019.