New York (HedgeCo.net) – After experiencing the best start to a year since 2000, hedge funds paused for a breather during March, delivering a marginally negative performance. With the exception of the US, most markets across the globe registered declines and the Eurekahedge Hedge Fund Index dipped 0.14% in March with the MSCI World Index up by 0.39% for the month.
Key highlights for March 2012:
* Long/short equity, multi-strategy and relative value funds witnessed their best quarter since 3Q 2009 with gains of 6.1%, 4.93% and 4.29% respectively.
* Assets in hedge funds crossed US$1.76 trillion, gaining over US$50 billion during the first three months of 2012.
* Long-only absolute return funds saw gains of 11.4% in the first quarter of this year.
* Hedge fund managers employing non-conventional strategies have grown their assets to US$63.2 billion, their highest level since August 2008.
* Relative value managers reached US$50 billion of capital for the first time on record.
* Islamic funds outperformed other alternative vehicles, gaining 0.63% during March 2012.
* More than 100 hedge funds have been launched globally as at the end of March this year.
March was a month filled with mixed returns across the various regional investment mandates. Early results showed that Latin American hedge funds delivered the best performance this month and the Eurekahedge Latin American Hedge Fund Index gained a notable 0.80% despite most emerging markets witnessing sell-offs during this period – evident in the 3.50% decline in the MSCI Emerging Markets Index. Managers invested in the region had taken cautious positions in the Brazilian market-based risks of overvaluation and currency. Short positions in Brazil were helpful to portfolios and some managers also reported positive returns from long holdings in the broader region.
North American managers witnessed their fourth consecutive month of positive returns with the Eurekahedge North American Hedge Fund Index gaining 0.46%, bringing its year to date return to 4.63%. Overhang from the high risk aversion and volatility seen in 2H 2011 resulted in some careful positioning by North American hedge funds, effectively preventing most managers from capitalising on the strong positive trend in 1Q 2012. The S&P500 gained 12% in the first quarter of 2012, reflecting the best quarterly performance since 1998.
Most strategic mandates delivered marginally positive results in March with hedge fund managers investing in fixed income products performing better than the rest. The Eurekahedge Relative Value Hedge Fund Index gained 0.48% while the Eurekahedge Fixed Income Hedge Fund Index was up 0.46% during the month. A number of managers reported gains from long positions in the high yield loans sector as declining fears about the European debt situation led to a strong performance in lower rated bonds.
CTA/managed futures and macro funds delivered the worst performance for March with a decrease of 0.72% and 0.70% respectively. The weak performance of commodities during the month contributed to the declines in these strategies. The DJ UBS Commodity Index dropped 4.14% and the S&P Goldman Sachs Commodity Index lost 2.36% with natural gas prices declining 22% during the month. Oil prices also saw a decline in March amid speculation of the release of strategic reserves and concerns of a lowering demand due to slowdown in China. Some managers also reported losing out due to long positions in gold.
