HFRI Indices- March 2014 performance notes
HEDGE FUNDS CONCLUDE VOLATILE 1Q14 WITH MIXED PERFORMANCE IN MARCH
Macro losses offset Relative Value gains to end quarter; RVA, Event Driven top equity markets, lead all hedge fund strategies
through 1Q14
March
gains were led by fixed income based Relative Value Arbitrage strategies, with
the HFRI Relative Value Index gaining +0.6 percent for the month and +2.4
percent for 1Q14, leading all hedge fund strategies in the quarter. With positive
performance in each month of the quarter, Relative Value Arbitrage strategies
have posted gains in 55 of 63 months since January 2009, with an average
annualized gain of +10.7 percent over that period. While all sub-strategies
posted gains for March, gains were led by Sovereign and Asset Backed Strategies,
with the HFRI RV: Sovereign Index gaining +1.1 percent and the HFRI RV: Asset
Backed Index up +1.3 percent. HFRI RV: Yield Alternative Index gained +1.0
percent for the month and +3.7 percent for 1Q14, while HFRI RV: Volatility
Index gained +0.5 percent in March and +2.0 for 1Q14.
Event
Driven strategies extended strong 2013 performance through 1Q14, despite
posting a narrow decline for March. The HFRI Event Driven Index declined -0.1
percent in March but gained +1.8 percent for the quarter, led by a continuation
of the powerful M&A, IPO and shareholder activist trends that dominated
2013. The HFRI ED: Activist Index gained +2.1 percent in March and +3.3 percent
for 1Q14, the leading area of ED performance, while the HFRI ED: Distressed
Index and Credit Arbitrage strategies gained +2.3 and +2.7 percent,
respectively, for 1Q14. The HFRI: ED Special Situations Index gained +1.7
percent for 1Q14, despite posting a decline of -0.5 percent for March.
The
HFRI Equity Hedge Index posted gain of +1.4 percent for 1Q14 despite a decline
of -0.2 percent for March. Most Equity Hedge sub-strategies were narrowly
changed for March, led by a gain of +0.3 for the HFRI EH: Energy/Basic
Materials Index, while HFRI Quantitative Directional Index posted the weakest
performance with a decline of -0.8 percent. For the 1Q14, funds specializing in
Technology and Energy led EH performance, with the HFRI EH:
Technology/Healthcare Index gaining +5.7 percent, and the HFRI EH: Energy/Basic
Materials Index up +6.0 percent for the quarter.
Macro
strategies were the only area of hedge fund performance to post a decline for
1Q14, with a March drop of –1.1 percent for the HFRI Macro Index offsetting
February gains and bringing first quarter performance to a decline of -0.5
percent. The HFRI Macro: Currency Index gained +0.74 percent for March, leading
Macro sub-strategy performance for the month, while HFRI Macro: Commodity Index
led Macro sub-strats for the first quarter with a gain of +2.4 percent. Quantitative, trend following CTA strategies
led declines for both the month and the quarter, with the HFRI Macro:
Systematic Diversified/CTA Index falling -1.9 percent for March and -1.8
percent for 1Q14.
“Hedge
funds posted gains for the first quarter, effectively navigating volatility
from macroeconomic, geopolitical and corporate sources despite escalation of
international tension regarding Russia’s annexation of Crimea and continued
commitment by the US Federal Reserve to deliberate extraction of stimulus
measures, impacting not only the US but the global economy,” stated Kenneth J.
Heinz, President of HFR. “The choppy financial market environment of 1Q14
contrasts sharply with the equity beta driven gains for 2013, contributing to
an increased dispersion of performance and increased traction for hedge fund
strategies offering low correlation to equity markets, including not only Event
Driven and RV Arbitrage, but also Currency, Commodity, Volatility, and
Technology strategies. Hedge fund investors continue to actively position in
strategies offering positive optionality inherent in specialized, focused
exposures which allow them to participate in continued gains across these asset
classes, but also afford portfolio protection from rising yields, credit
deterioration and equity corrections which may occur through 2014.”
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