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HFRI Fund Weighted Composite Index down 0.17% in March, +1.44% YTD

Friday, April 08, 2011
Opalesque Industry Update - Global financial markets ended a volatile month with mixed equity market performance as the combination of political unrest across the Middle East and reaction to Japanese natural and environmental situations continued to impact investors. The Japanese Yen touched a 15 year high against the US Dollar intra-month, but retraced a portion of the gains by month end; Oil and Silver posted gains for the month, with mixed and widely dispersed performance across other commodities. Hedge funds posted a narrow decline for the month, with the HFRI Fund Weighted Composite Index declining -0.17% with gains in Event Driven, Relative Value Arbitrage and Equity Hedge strategies offset by negative contributions from Macro.

In a month in which the Nikkei 225 declined by over -8%, Japan-focused hedge funds posted an average decline of -0.72% in March, detracting modestly from broad index performance. The HFRI Emerging Markets Index posted a gain of +1.15% for the month, with positive contributions from fund exposure in Asia ex-Japan, Latin America and Multiple Emerging Markets only partially offset by losses in Russia/Eastern Europe.

Posting its seventh consecutive month of gains, the HFRI Event Driven (Total) Index rose +0.61% for the month, with corporate transaction activity continuing to accelerate and transactions involving both NYSE Euronext and T-Mobile highlighting an active month in Event Driven. Gains in European M&A and Equity Special Situations offset weakness in Distressed for the month, with the HFRI ED: Merger Arbitrage Index posting a gain of +0.26%, while the HFRI:ED Distressed/Restructuring Index posted a decline of -0.22%. For the quarter, Event Driven posted a gain of +3.64%, the top area of strategy performance.

The HFRI Macro (Total) Index posted a decline of -1.31% for March, with losses in both discretionary and systematic trend following strategies concentrated in commodity and equity exposures. The HFRI Macro: Systematic Diversified Index posted a decline of -1.71% as markets experienced sharp reversals during the month, contributing losses across equities and soft commodities, which were only partially offset by metals and currencies exposure. Exposures to long fixed income and commodities also contributed to losses in Macro Discretionary strategies.

The HFRI Relative Value (Total) Index posted a gain of +0.49% for March with positive performance across fixed income strategies as yields traded in a wide intra-month range but settled with little change. The HFRI Convertible Arbitrage Index posted a gain of +0.45%, while the HFRI RVA: Multi-Strategy Index gained +0.29%; both of these were impacted by shifts in fixed income yields levels and curve shapes, with implied volatilities also tracing a wide intra-month range. Yield-alternative energy infrastructure and real estate also posted gains for the month, while volatility exposure detracted from performance. Relative Value Strategies have posted gains in 26 months of the last 27 months since December 2008.

Also posting the 7th consecutive month of gains, the HFRI Equity Hedge (Total) Index posted a gain of +0.31% in a volatile and widely dispersed month for equity markets, with gains in Equity Market Neutral and Fundamental Growth partially offset by weakness in Energy and Basic Materials and short exposure. Fundamental Growth strategies gained +1.28% on continued improvement in US consumer & employment data while Equity Market Neutral Index posted a gain of +0.73%. The HFRI EH: Technology/Healthcare Index gained +0.85%, while the HFRI EH: Energy/Basic Materials Index declined -2.00% and the HFRI EH: Short Bias Index declined by -2.46%.

The HFRI Fund of Hedge Funds Index had a modest decline of -0.13%, mirroring the performance of the HFRI Fund Weighted Composite Index. Full performance table: Source

- FG

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