New York (HedgeCo.Net) – The Hennessee Hedge Fund Index lost -0.48% in March (+1.50% YTD), whilethe S&P 500 gained +0.69% (+1.30% YTD), the Dow Jones Industrial Average rose +0.83% (-0.72% YTD), and the NASDAQ Composite Index declined -2.53% (+0.54% YTD). Bonds were negative on the month, as the Barclays Aggregate Bond Index decreased -0.17% (+1.84% YTD).
“Momentum names in the NASDAQ were hit hard in March, reducing hedge fund performance as the reduction of fed bond purchases increased concerns that the 10-Year was heading above 3%.” commented Charles Gradante, Co-Founder of Hennessee Group LLC.
“The Hennessee Hedge Fund Index was down -0.48% with the top three strategies for the month being Latin America (+3.51%), High Yield (+1.36%) and Convertible Arbitrage (+1.15%).”highlighted Charles Gradante. “The bottom three strategies for the month were Technology (-2.74%), International (-2.03%) and Macro (-1.44%).”
“Risk assets were mostly higher even as volatility, measured by the VIX, increased from February’s month end value of 14 to an intra-month high over 17.5.” commented Charles Gradante. “Hedge fund managers had a difficult time weathering the back and forth direction of the market during March.”
Equity long/short hedge funds were negative in March, as the Hennessee Long/Short Equity Index dipped -0.30% (+2.59% YTD). The best performing sectors were telecommunication services (+4.67%), utilities (+3.09%), and financials (+3.08%), while underperforming sectors were consumer discretionary (-2.93%), health care (-1.37%) and information technology (+0.21%). The utilities sector is now the best performing sector for the year having gained 9.02% YTD through March, while consumer discretionary is bringing up the rear, having lost -3.16% YTD through March.
“Managers are not changing their net long bias as there is no competition for equities and stock buybacks continue reducing supply.” reported Charles Gradante. “However, hedge fund managers reduced exposures to high beta stocks in March.”
“Managers continue to maintain bullish reporting to Hennessee that ‘bull markets don’t die of old age. Bull markets end with a recession, excessive valuations or a fat tail event’.”reported Lee Hennessee, Co-Founder of Hennessee Group LLC. “However, the fat tail event seems to point to unexpected steepening of the yield curve.”
The Hennessee Arbitrage/Event Driven Index decreased -0.37% in March (+1.90% YTD). The Barclays Aggregate Bond Index lost -0.17% (+1.81% YTD) as interest rates were slightly higher in March. High yield increased as the Merrill Lynch High Yield Master II Index increased +0.23% in during the month (+3.00% YTD). High yield spreads were slightly lower in March, losing 4 basis points to end the month 377 basis points over treasuries. The Hennessee Distressed Index gained +0.31% in March (+3.91% YTD) and was one of the few hedge fund strategies to fare well during the volatile month. The Hennessee Merger Arbitrage Index lost -1.22% in March (+0.62% YTD). The Hennessee Convertible Arbitrage Index also performed well, gaining +1.15% for the month (+3.26% YTD).
“Global markets continue to be choppy this year as Macro managers continue to take losses in Japan, Eastern Europe and Russia.” commented Charles Gradante.
The Hennessee Global/Macro Index decreased -0.78% in March (-0.45% YTD). The Dow Jones UBS Commodity Index was slightly higher for March, gaining +0.41% (+6.98% YTD), while the MSCI ACWI Index gained +0.22% (+0.61% YTD) and the MSCI EAFE Index lost -1.04% (+0.00% YTD). The Hennessee International Index lost -2.03% in March (-1.54%). Large gains in Italy, Israel and Spain were far outpaced by losses in Ireland, the United Kingdom, Denmark, Austria and Hong Kong. Emerging markets significantly outperformed developed markets in March with noteworthy gains in Turkey, Columbia, Brazil and India. The MSCI Emerging Market Index rose +2.92% (-0.80% YTD), while hedge fund managers had a hart time, as the Hennessee Emerging Market Index lost -0.54% (-0.09% YTD).
The Hennessee Macro Index declined -1.44% for the month of March (-1.29% YTD). Fixed income managers were modestly negative in March as bond yields were slightly higher for the month with the 10-Year U.S. Treasury ending the month at 2.73%, up 7 basis point from 2.66% in February. Commodities were weak for the month, with gold losing -3.20% and silver dropping -6.84%. The U.S. Dollar was mixed against major currencies, losing over -0.50% versus the Euro, -0.67% versus the Canadian Dollar and -2.04 % versus the South African Rand, while rising +0.60% versus the Japanese Yen and +0.15 versus the British Pound. Oil also dropped in March, with WTI losing -1.27% and European Brent Blend Crude slipping -2.78%. Natural gas also moved lower for the month, losing -6.67%.
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