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HEDGE FUNDS GAIN TO CONCLUDE 1Q AS US EQUITIES MIXED
HFRI positive in 12 of last 13 months; Equity Hedge, Relative Value Arbitrage lead as Fed raises US rates
CHICAGO, (April 7, 2017) – Hedge funds advanced again in March, concluding a first quarter that saw gains in all three months and adding to a period of extended positive performance that has seen industry returns climb for five consecutive months and 12 of the last 13 months, according to data released today by HFR®, the established global industry leader in the indexation, analysis and research of the global hedge fund industry.
The HFRI Fund Weighted Composite Index® (FWC) advanced +0.24 percent for the month, topping the March performance of both the S&P 500 and DJIA. The March gain extends the HFRI FWC Index Value to 13,252, the fourth consecutive monthly record. For 1Q17, the HFRI is up +2.3 percent, compared to the -0.6 percent decline in the volatile 1Q16.
For the third consecutive month, Equity Hedge (EH) led industry performance with strong contributions from Technology, Fundamental Growth and Healthcare strategies, as US equities posted mixed performance in March. The HFRI Equity Hedge (Total) Index climbed +0.64 percent for the month, bringing the 1Q gain to +3.62 percent, leading all main strategy performance for 2017. EH sub-strategy returns were led by the HFRI EH: Technology Index, which was up +2.7 percent for the month and extends its 2017 gain to +5.60 percent. The HFRI EH: Fundamental Growth Index was up +1.2 percent in March, increasing its YTD performance to +5.61 percent, which trails only Healthcare as the leading area of HFRI sub-strategy YTD performance. The HFRI EH: Healthcare Index added +1.1 percent for the month, extending its YTD performance to +6.73 percent, leading all HFRI sub-strategies.
Fixed income-based Relative Value Arbitrage (RVA) strategies also gained in March, despite the increase in US interest rates by the US Federal Reserve. The HFRI Relative Value (Total) Index climbed +0.53 percent, bringing YTD performance to +2.5 percent and extending the streak of consecutive monthly gains to 13 months. RVA sub-strategy performance was led by Volatility strategies, with the HFRI RV: Volatility Index gaining +2.1 percent, increasing its YTD return to +2.6 percent. Credit multi-strategy funds also posted gains in March, as the US Federal Reserve increased interest rates, with the HFRI RV: Multi-Strategy Index advancing +0.33 percent.
The HFRI Event-Driven (Total) Index was essentially flat in March, posting a narrow gain of +0.01 percent, as positive contributions from Merger Arbitrage and Special Situations strategies offset declines in Distressed funds. The HFRI ED: Merger Arbitrage Index advanced +0.42 percent and the HFRI ED: Special Situations Index added +0.34 percent for the month, while the HFRI ED: Distressed Index declined -0.9 percent in March. For the year, Special Situations leads ED performance with a +3.2 percent return.
The HFRI Macro (Total) Index declined -0.48 percent for the month, as gains in Currency strategies were offset by declines in Commodity and CTA strategies. The HFRI Macro: Currency Index surged +2.7 percent in March, bringing YTD performance to +3.7 percent, leading all Macro sub-strategies. The HFRI Macro: Systematic Diversified/CTA Index declined -1.35 percent for the month, while the HFRI Macro: Commodity Index lost -0.37 percent, lowering first quarter performance for each of these indices into negative territory, at -1.1 and -0.01 percent, respectively.
“Hedge funds gained in March as the Federal Reserve proceeded with a widely anticipated interest rate increase concurrent with a weakening of the Trump trade, and as US equities concluded a strong first quarter with mixed performance in March,” stated Kenneth J. Heinz, President of HFR. “In a similar manner to the 2016 intra-year market cycles that were driven by Brexit and the US election, 2017 financial market performance is likely to be driven by similar intra-year cycles, including upcoming European elections, with these contributing to and creating opportunities for hedged long/short strategies across different asset classes. Funds positioned for this environment are likely to lead industry growth and performance in 2017.”