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Macro hedge fund bets pay off in March market volatility

hedge_funds_coronavirus_profitIn a month defined by volatility, macro strategies were the only type of hedge funds to make gains in March as stock markets worldwide were plunged into chaos due to Covid-19.

Across the hedge fund industry, overall figures remained in the red, save “event-driven strategies” which bet on global market and political events.

Macro hedge funds managed to stay in the black as the coronavirus crisis triggered equity losses, sharp arbitrage spread widening, and an “expected” slowdown of the global economy, according to Hedge Fund Research.

HFR president, Kenneth Heinz, said: “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."

“Uncorrelated, defensively and long volatility-positioned hedge fund strategies posted impressive, negatively-corelated gains for the month, while directional equity-sensitive, long-biased, and arbitrage strategies posted sharp declines,” Heinz added.

According to the firm, the HFRI Macro (Total) Index delivered returns of 2.1% for the month. This was aided by “significant” contributions from quantitative, trend-following macro commodity trading advisor (CTA) strategies. The HFRI Macro Systematic Diersified Index also gained 2.9% for March.

CTA gains were attributed to trading long and short positions across fixed income, equity, currencies, metals, and energy commodities, the HFR said.

Discretionary commodity and currency macro strategies also gained for the month, with the HFRI Macro: Commodity Index returning 3.1%, while the currency index also saw returns of around 3%.t, while the HFRI Macro: Currency Index added +2.9 percent.

These returns could have been greater had they not been offset by other hedge fund strategies, including indices such as the HFRI Fund Weighted Composite Index which fell by 5.9%, and the HFRI 500 Hedge Fund Composite Index which lost 6.2%

The HFRI Emerging Markets India Index lost over 35%, and the Latin American index saw a fall of oer 20%.

“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,” Heinz said.

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