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Laxman Pai, Opalesque Asia: The Preqin All-Strategies Hedge Fund benchmark generated a loss of 10.38% in Q1 2020, all but erasing the annual gain of 10.97% made in 2019.
But given that the S&P 500 Index fell by 20.00% in the first quarter of this year, hedge funds performed better than traditional stock market funds, said Preqin in its special report, 'COVID-19's Impact on Alternative Assets'.
According to the report, two strategies were especially hard hit. Equity-focused hedge funds fell in February and March as global equity markets plunged.
Long bias funds underperformed, losing 22.59% in the first quarter of 2020. Merger arbitrage funds have been affected as deals are put on hold, losing 8.21% in Q1 2020.
Fixed-income arbitrage funds typically help investors to defend their portfolios when equity markets are falling, but the strategy is down 7.57% in Q1 2020 as price relationships deviate from historical patterns.
Two strategies performed better than the rest. CTAs -which offer a defensive strategy typically uncorrelated to public markets - was the best performing top-level hedge fund strategy in Q1 2020, and the only one to make gains, it said.
A March return of +2.76% drove the benchmark to +2.15% for Q1 2020. Strategies that are less correlated to traditional markets, such as macro strategies, typically have significantly lower drawdowns than equity hedge funds.
Macro strategies were underwater in Q1 2020 but managed to limit th...................... To view our full article Click here
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