Macro tops charts as hedge fund industry sees historic performance dispersion

HFR provided its industry assessment earlier this week declaring macro hedge funds the winners in March as the coronavirus fallout drove the equity market into deep decline and arbitrage spreads widened. Hedge funds experienced a historical dispersion of performance for the month as captured by data visualization tool HFR IndexScope, with the top decile of HFRI constituents posting an average gain of 18.5%, while the bottom decile fell an average of -30.0%. Through the first quarter, the HFRI Fund Weighted Composite has lost -8.3% year to date, while the HFRI Macro (Total) Index has gained 1.2%. Last month, the HFRI Fund Weighted Composite Index declined by -5.9%, while the HFRI 500 Composite Index lost -6.2%. Meanwhile macro managers did what they do best in zigging while the world is zagging with the firm’s macro index gaining 2.1% for the month with significant contributions from quantitative, trend-following macro CTA strategies. The commodity index returned 3.1% in March, while currency managers were up 2.9%. “Financial markets experienced a historic spike in volatility in March as the spreading coronavirus pandemic drove steep losses across global equities and energy commodities, as well as an indiscriminate flight to quality across fixed income and currencies,” said Kenneth Heinz, president of HFR. “Uncorrelated, defensively and long volatility-positioned hedge fund strategies posted impressive, negatively correlated gains for the month, while directional equity-sensitive, long-biased, and arbitrage strategies posted sharp declines.” The worst performing sub-index was event-driven with a March decline of -12.4%, dragging year-to-date return figures down to -15%. “In many respects, March and 1Q20 reflect a sharp and volatile reversal of the risk-on environment which dominated 2019, underscoring the importance of maintaining a diversified alternatives portfolio,” added Heinz. “Macro and trend-following strategies are likely to continue to lead industry performance with models evolving to effectively capture dynamic, fluid and shifting trends as the pandemic progresses.” Perhaps spelling even more dire news for risk-averse institutional investors is the fact that risk parity strategies also fell in March, with the HFR Risk Parity Vol 10 Index losing -9.2%, while the HFR Risk Parity Vol 15 Index declined -18.4%.

Macro tops charts as hedge fund industry sees historic performance dispersion

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