Hedge Funds Wealth in the First Quarter But Lagged the Market in March

Hedge fund performance numbers for March and the first quarter are finally out. Data from With Intelligence shows that generally, hedge funds were protecting wealth during the first quarter. However, while they outperformed stocks broadly in January and February, hedge funds couldn’t cope with the March rally in the stock market.

Hedge fund performance in March

With Intelligence’s Eurekahedge hedge fund index returned 1.35% in March, underperforming the S&P 500’s 3.58% return. The markets have been dealt with Extensive sanctions against Russia imposed by the United States and its allies in connection with its invasion of Ukraine. Fears about stagflation are starting to grow as the Federal Reserve turns a hawkish stance as it tries to combat inflation.

The US Consumer Price Index jumped 8.5% in March, posting the largest year-on-year increase since December 1981. The Federal Reserve raised interest rates by 25 basis points in March, in an effort to rein in inflation as it is expected to raise interest rates at least six times. this year.

Latin America topped all other geographies in March with a return of 3.59%, while Asia, excluding Japan, was up at the back with a 1.4% loss. Among the strategies, CTA/Managed Futures was the best performing strategy, at 4.59%, while arbitrage was the worst performing strategy, at -1.16%.

Preliminary inflows data show that hedge funds collected $19 billion in performance-driven gains in March, though $2.6 billion in outflows partially offset this. As of the end of March, the global hedge fund industry had $2.4 trillion in assets under management.

Flow figures in the first quarter

Looking at the first quarter as a whole, intelligence reports that hedge funds have been nearly flat, protecting wealth as the stock market plummets, and a -4.9% return for large-cap US stocks. The company reported that hedge funds lost 1.3% in January and 0.3% in February but flipped into the green for March with a return of 1.4%.

Although investors pulled money from hedge funds in March, intelligence reports that they added to their hedge funds overall during the first quarter, with inflows of $11.2 billion in the first three months of the year.

The company adds that $8.5 billion of those flows went to macro funds, while $4.3 billion went to managed futures funds. According to Eurekahedge data, the hedge fund industry reported $10.8 billion in performance-based losses and $18.3 billion in investor redemptions for the first three months of the year.

Revenue by strategy for the first quarter

As far as strategies, CTA/managed futures funds are leading the way so far with a return of 6.84%, followed by macro funds which are up 2.52%.

However, there is a discrepancy in the data as With Intelligence shows a 7.8% return for managed futures funds in the first quarter. According to Eurekahedge, fixed income, arbitrage and stock funds long/short are at the bottom of the pile year on year with returns of -1.89%, -2.68% and -3.58%, respectively.

Data from With Intelligence agrees with Eurekahedge on top and bottom hedge fund strategies, with managed futures and macro funds on top, the only two strategies with meaningful positive returns.

However, the returned numbers were different even though Eurekahedge is owned by With Intelligence, which shows how the data varies by company. Different hedge funds It reports for different companies, so to get a more realistic picture of hedge fund performance, it’s a good idea to review data from multiple sources.

According to With Intelligence, multi-strategy and event funds were mainly flat in the first quarter, while relative value and arbitrage, fixed income and credit, funds of funds, and long/short equity funds were all in the red. Long/short stocks were the worst-performing strategy with a return of -3.5%, while mutual funds were the second-worst strategy at -2.3%.

Consequences of the war in Ukraine

The best return among hedge funds with assets of at least $50 million was 59.8% for the first quarter. The best performing macro fund, the Hyder Jupiter Fund, had a 149% rate in the first quarter. Fifty-five percent of funds with assets over $1 billion have reported a positive return so far.

The first quarter was marked by persistent and worsening inflation and significant geopolitical risks, both of which affected the market’s performance. Not surprisingly, managed futures and macro hedge funds have been the most benefited from volatility sparked by the war in Ukraine.

The economic and political consequences of the Russian invasion have upended bullish market expectations regarding economic recovery and central bank policies. The company added that those consequences also led to setbacks and turmoil that swept the market.

According to With Intelligence, the war in Ukraine will have a secondary and collateral effect on national economies and businesses for years to come.

Michelle Jones contributed to this report.