Hedge funds fail to capitalise on March's equity market rallies

Hedge funds posted modest gains in March this year, with emerging market hedge funds representing the best performers, according to the latest Credit Suisse/Tremont Hedge Fund Index figures.

The index shows that performance for hedge funds in March was up 0.65 per cent, bringing year-to-date returns to 0.85 per cent.

Oliver Schupp, president of Credit Suisse Index Co, said with markets continuing to be volatile, many hedge funds remained defensively positioned. These defensive positions prevented some managers from capitalising on last month’s equity rally, Schupp said.

But Schupp defended the performance of hedge funds, saying that despite March’s equity rally, most equity indices remain down for the year, “while hedge funds’ returns to date have been positive with far less volatility”.

According to the index, emerging markets hedge funds performed relatively well, returning 2.24 per cent in March. Some emerging markets hedge fund managers benefited from stronger commodities markets and government fiscal stimulus plans, the statement from the index manager said.

The most recent performance by emerging market hedge funds reversed the negative trend of the past year. Emerging markets hedge funds are down 0.05 per cent year to date and down more than 27 per cent over one year.

Unsurprisingly, equity market neutral hedge funds have been the worst performers over one year, down more than 43 per cent.

The best performing hedge fund styles over the past year have been those with a dedicated short bias (up more than 5 per cent) and managed futures (up more than 4 per cent).

They are the only two types of hedge funds on the index to be in positive territory over one year. However, year to date the majority of varieties of hedge funds on Credit Suisse/Tremont Hedge Fund Index are in positive territory.

The index is constructed using the Credit Suisse/Tremont database of more than 5,000 hedge funds and includes both open and closed funds located in the US and elsewhere, but does not include fund of funds.