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Global financial markets posted steep losses in March as the coronavirus pandemic widened and volatility surged. Equities posted losses across most regions and sectors led by Energy and small cap exposures. The US Federal Reserve cut interest rates to near zero while the Treasury engaged in quantitative easing and congress passed large stimulus bills. Commodity prices plunged led by Oil, which fell on weakening demand as well as OPEC output dispute. The US Dollar posted mixed performance, gaining against the British Pound, while falling against the Swiss Franc. Hedge funds posted losses for the month, with Macro CTA strategies partially offsetting losses with a gain for the month. The HFRX Global Hedge Fund Index declined -5.88% for the period, topping equity market declines by over 600 bps.
HFRX Macro Systematic Diversified CTA Index posted a gain of +1.11% while the broader HFRX Macro/CTA Index was almost unchanged, posting a decline of -0.81% for March from gains in Systematic trend-following managers offset by declines in Global Discretionary strategies. The HFRX Macro Systematic Diversified CTA Index gained with contributions from short equity, long fixed income and short commodity positions as Oil experienced sharp losses, and most Metals and Agricultural commodities also had significant declines; the US Dollar strengthened significantly against the British Pound and most Emerging Markets currencies while declined against the Japanese Yen.
HFRX Event Driven Index posted a decline of -5.48% for March from declines in Special Situations equity strategies and Merger Arbitrage managers. The HFRX Merger Arbitrage Index and the HFRX Special Situations Index posted declines of -7.16% and -5.36%, respectively, as M&A activity slowed on difficulty in financing transactions, while spreads on existing deals widened on uncertainty about closing deals.
HFRX Relative Value Arbitrage Index posted a decline of -6.07% for March from declines in Multi-Strategy and Convertible Arbitrage managers. The HFRX RV: Multi-Strategy Index posted a decline of -6.06% for the month as spreads widened significantly. The HFRX Convertible Arbitrage Index posted a decline of -6.22% for the month as spread widening offset the decline in yield and sharp increase in volatility.
HFRX Equity Hedge Index posted a decline of -9.58% for March, from declines across sub-strategies. The HFRX Fundamental Value Index posted a decline of -3.96% from exposure to equities of all capitalizations across developed markets. The HFRX Market Neutral Index declined -5.93% for the month as spreads widened in mean reverting, factor-based strategies and fundamental managers.
Comments reference performance figures for March 31, 2020