Macro Hedge Funds Post Best Month Since March 2022, Best Quarter Since 2003

The HFRI fund-weighted composite index surged an estimated +2.5% in March, padding first quarter gains to +4.95%, its strongest quarter for 20 years.

Macro strategies were the clear winner in March, surging an estimated +3.9% for the month, bringing Q1 2024 performance to +6.9%, the strongest calendar quarter since the second quarter of 2003. Macro sub-strategy gains were led by the HFRI Macro: Systematic Diversified Index, which jumped +4.5% in March and +10.1% for Q1, its strongest calendar quarter since Q4 1999. The HFRI Macro: Trend Following Index also produced strong March performance, posting a +4.3% return to increase its Q1 24 return to +8.7%, while the HFRI Macro: Multi Strategy Index added +3.9% for the month. Risk Parity strategies also generated strong performance in March, with the HFR Risk Parity Vol 15 Index surging +5.4% for the month.

Equity Hedge (EH) funds also posted strong performance in March, with gains led by energy, quantitative directional, and healthcare exposures. The HFRI Equity Hedge (Total) Index jumped +2.4% (estimated) for the month, bringing the Q1 gain to +5.5%. EH sub-strategy performance was led by the HFRI EH: Energy/Basic Materials Index, which surged +3.8%t in March, the HFRI EH: Quantitative Directional Index, which jumped +3.2%, and the HFRI EH: Healthcare Index, which added +2.8% for the month.

Performance dispersion declined in March, as the top decile of the HFRI FWC constituents advanced by an average of +9.5%, while the bottom decile fell by an average of -2.1%, representing a top/bottom dispersion of 11.6% for the month. By comparison, the top/bottom performance dispersion in February was 15.8%. In the trailing 12 months ending March 2024, the top decile of FWC constituents gained +45.2%, while the bottom decile declined -10.0%, representing a top/bottom dispersion of 55.2%. Approximately 85% of hedge funds produced positive performance in March.

“Hedge funds generated robust performance in March to conclude its strongest 1Q since 2021, with positive contributions from CTAs, Energy, Multi-Strategy, Healthcare, and Cryptocurrency exposures, and as uncorrelated Macro posted its highest quarter in over 20 years. In contrast to most of 2023, the macroeconomic environment in 1Q was dominated by expectations for falling inflation and interest rates, and improving expectations for economic growth, despite ongoing, fluid, uncertain and potentially volatile elevated geopolitical risk,” said Kenneth J. Heinz, President of HFR. “Managers remain keenly focused on this tension between falling macroeconomic risk and rising geopolitical risk in 2024, with potential for sharp reversals, volatility and dislocation driven by either of these powerful trends. Institutional investors interested in opportunistic exposure to these trends while also insulating portfolios from potential volatility are likely to allocate or increase exposure to funds which have demonstrated their strategy’s robustness and veracity over the recent market cycles.”