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COVID-19 ushers in biggest challenge for hedge funds since 2008 financial crisis

Friday, April 10, 2020
Opalesque Industry Update - Global hedge funds lost an average of -7.25% in March 2020, according to the latest eVestment hedge fund performance data, following weeks of financial markets, economic and human turmoil created by the world-wide COVID-19 pandemic.

March's average loss was the second largest since eVestment began tracking hedge fund data and the largest since the height of the global financial crisis in October 2008 when the average fund lost between 8%-9%.

The average year-to-date (YTD) hedge fund industry return now stands at -9.87%, according to eVestment data.

There was plenty of red ink to go around in March, with almost all hedge fund strategies, geographies and primary markets eVestment tracks turning in negative performances for the month.

"In spite of March's overwhelmingly negative figures, there were still highlights to be found in virtually every segment of the industry," said Peter Laurelli, eVestment's global head of research. "It is now more important than ever to think of the industry not as a whole, but as a vast group of individuals with discretion, and programs and algorithms with differing and evolving rules. In a group of individuals operating in a pool of markets, some will navigate successfully, and some will not, making fund research, due diligence and monitoring more important than ever."

Activist hedge funds were among the biggest performance losers in March, at -20.67% for the month, bringing year to date (YTD) activist hedge fund returns to -27.71%. This is the second most-negative YTD return among all the hedge fund types eVestment tracks, behind Brazil-focused hedge funds, which stand at -30.15% YTD.

Other highlights from the latest eVestment hedge fund performance data include:

- All was not negative in the hedge fund business in March. Among primary strategies, Managed Futures funds eked out +0.41% average returns last month. These funds are still negative YTD at -0.13% however. Among primary markets tracked, Volatility/Options Strategy funds turned in +3.66% average returns in March and Broad Financial Derivative funds saw average returns of +1.07%.

- India- and Russia-focused funds also saw big losses in March, at -24.51% and -17.16% respectively. Both are also deeply in the red YTD, with India-focused funds posting YTD returns of -26.72% and Russia-focused funds posting YTD returns of -22.71%.

- Among primary strategies eVestment tracks, both Distressed funds and Relative Value Credit funds joined Activist funds in double digit negative returns territory, at -11.56% and -10.42% respectively.

"Just as in the global financial crisis of 2008, the current situation is not contained within a single month, but rather one which has taken the prior global economic environment and drastically reshaped it in a way which is still evolving," said eVestment's Laurelli. "While there were negative and positive returns in the month of March, managers will ultimately be judged over the course of the continually evolving situation."

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