Hedge Fund Returns Back To Negative In March

by Phillip Morton, Investors Offshore.com

07 April 2005

After a positive February, hedge fund performance as measured by the S&P Hedge Fund Index finished March down by 0.55%, producing a negative year-to-date return of -0.20% for the index.

Contributing to the underperformance in March were the negative returns registered by the S&P Directional/Tactical Index (-0.86%), the S&P Arbitrage Index (-0.52%) and the S&P Event-Driven Index (-0.28%).

Within the S&P Directional/Tactical Index, Equity Long/Short managers experienced the largest losses in March. These declines have been largely attributed to the recent actions of the Federal Reserve, uneasiness about inflation and increasing energy prices. As a result, the S&P Equity Long/Short Index finished last month down 1.32%.

The S&P Managed Futures Index, which is comprised of 14 predominantly medium- to long-term trend followers, ended the month in slightly positive territory, up 0.29%.

Justin Dew, Senior Hedge Fund Specialist at Standard & Poor's observed that:

"Performance was mixed in Managed Futures as some managers experienced gains in metal and energy positions, while others were flat in fixed income and experienced losses in currencies.

"Weaker than expected economic data in both Europe and Japan drove these currencies lower versus the US dollar, while rising interest rate expectations in the US propelled the dollar higher.”

Meanwhile, the S&P Arbitrage Index lost 0.52% during March, bringing its year-to-date return to 0.08%. Equity Market Neutral was the only sector in the index to register gains for the month.

The S&P Event-Driven Index lost 0.28% for the month. These positions underperformed due in part to the effects of rising interest rates and a declining equity market, according to Standard & Poors.

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