West Palm Beach (HedgeCo.net) – March was a challenging month for hedge funds, which entered the month with tight net exposures, according to research by hedge fund consultant Hennessee LLC.

Technology and healthcare/biotech were bright spots for hedge funds, as these sectors were relative outperformers. While the strong equity rally did cause short squeezes, most hedge fund managers expect short portfolios to generate profits in the near term.

The Hennessee Hedge Fund Index advanced +1.37% in March (+1.09% YTD), while the S&P 500 advanced +8.54% (-11.67% YTD).

“Most funds were caught with tight net exposures and were unable to participate in the rally," Charles Gradante, Co-Founder of Hennessee Group said, "Managers were also hurt as the sectors they have been heavily short, such as financials, consumer discretionary and materials, were the sectors that rallied the strongest.”

“Despite the underperformance in March relative to the equity benchmarks, hedge funds are still outperforming for the year,” said Lee Hennessee , Managing Principal of Hennessee Group. “We expect that we will continue to see volatility throughout the year.”

Alex Akesson