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Hedge funds conclude strong first quarter with mixed strategy performance in March

Tuesday, April 10, 2012
Opalesque Industry Update - Hedge fund performance was essentially unchanged in March, with the HFRI Fund Weighted Composite Index posting a narrow loss of -0.01 percent (1 bp) for the month, according to data released today by HFR (Hedge Fund Research, Inc.), the global leader in the indexation and analysis of the hedge fund industry. The HFRI Fund Weighted Composite posted a gain of +4.94 percent for 1Q12, the best first quarter since 2006.

Hedge fund gains were broad-based across strategy areas for both March and 1Q. Relative Value Arbitrage posted the strongest strategy area of performance in March, with the HFRI Relative Value Index gaining +0.60 percent for the month and +4.3 percent for 1Q12; fixed income-based relative value has posted recent gains as strong corporate credit markets and effective hedging has offset the impact of rising US yields. For the full quarter, Equity Hedge posted the strongest gains across strategies, with the HFRI Equity Hedge Index gaining +7.3 percent, the best first quarter performance total for Equity Hedge since 2000; Equity Hedge gained +0.3 percent in March, completing the 3rd consecutive month of gains.

Event Driven funds also benefitted from strong equity and credit markets in 1Q, with the HFRI Event Driven Index gaining +4.5 percent for 1Q, concluding the quarter with a gain of +0.2 percent in March; similar to Equity Hedge and Relative Value strategies, Event Driven funds were positive in all three months of 1Q12. Diverging from other strategies, Macro funds posted a decline to end 1Q, with the HFRI Macro Index declining -0.92 percent in March; despite this, Macro posted a gain of +1.2 percent for 1Q12, the weakest area of strategy performance. Macro performance was undermined by mixed performance across commodity exposure and quantitative, systematic managers; the HFRI Macro: Systematic Diversified Index declined -1.96 percent for March and -0.68 for 1Q.

Fund of Hedge Funds posted a gain of +3.4 percent for the 1Q12, adding +0.06 percent in March, while the HFRI Emerging Markets Index gained +7.35 percent for 1Q12, despite a decline of -1.5 percent in March.

"Hedge fund gains from early 2012 were virtually unchanged in March, with overall 1Q performance the best in six years," stated Kenneth J. Heinz, President of HFR. "While many global equity markets rallied in early 1Q12, volatility has returned to equities and other asset classes in recent weeks, indicating that although the set of risks has shifted in 2012, navigating the nascent global growth environment requires tactical flexibility and positioning for a broad continuum of macroeconomic and fundamental financial market scenarios."... Full performance table: Source
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