Hedge fund performance mixed for month

The reversal in equity performance in March proved to be a difficult challenge for hedge funds with most HFR strategy index returns negative for the month. On a relative basis, macro and managed futures index returns were better than many equity focused hedge fund strategies. The first quarter returns were dispersed across strategies with a clear negative skew with both February and March being difficult performance months. 

Regardless of strategy, directional choppiness and volatility transition were not good for most hedge fund manager. After a good start, February was hit with a volatility spike and repricing event. March was slightly calmer with lower extremes in volatility, but the general volatility level is now almost double from end of 2017 levels. The market was also hit with  price transition spikes in both February and March as sentiment changed with concerns about trade wars, growth, and Fed changes. 

Few managers were able to exploit these macro directional trends in both equities and fixed income. Nevertheless, higher volatility or return dispersion is good for most hedge fund strategies which are based on security or market selection skill. Skill is usually displayed when there is more market differentiation.