Alt Investments
Macro Hedge Funds Ride Financial Turmoil, Post Gains

Macro funds, which are actively managed and try to profit from broad market swings caused by political or economic events, benefited from the sharp moves caused by troubles in the US banking system last month. Overall, hedge funds gained ground.
Hedge funds gained in April as banking turmoil and volatility
accelerated throughout the month and extended into May with the
closure and distressed acquisition of First Republic Bank,
industry figures show.
The HFRI 500 Fund Weighted Composite Index advanced 0.4 per cent
(estimated) in April, as managers effectively navigated the
recent surge in banking volatility with performance gains led by
Macro strategies, according to Hedge Fund
Research.
The HFRI Fund Weighted Composite Index® (FWC) also gained an
estimated 0.4 per cent for the month, led by macro and equity
strategies, the firm said.
Performance dispersion narrowed in April, as the top decile of
the HFRI FWC constituents advanced by an average of 5.5 per cent,
while the bottom decile fell by an average of -4.4 per cent.
Nearly half of hedge funds posted positive performance in
April.
The “uncorrelated macro” segment was the top-performing strategy
for the month, led by fundamental, discretionary macro strategies
and complemented by quantitative, trend-following CTA (Commodity
Trading Advisor) strategies.
Equity hedge funds, which invest long and short across
specialised sub-strategies, also gained in April, driven by
healthcare and energy sub-strategies, as volatility surged across
the financial sector. The HFRI Equity Hedge (Total) Index
advanced an estimated 0.4 per cent, while the investable HFRI 400
(US) Equity Hedge Index added 0.1 per cent in April.
Event-driven strategies, which often focus on out-of-favour, deep
value equity exposures and speculation on M&A situations,
also advanced in April as risk in financials accelerated, as seen
by pressures on US banks. The investable HFRI 400 Event-Driven
Index gained 0.2 per cent (estimated), while the HFRI
Event-Driven (Total) Index also added an estimated 0.2 per
cent.
Liquid Alternative UCITS strategies also gained in April, with
the HFRX Global Index returning 0.34 per cent, while the HFRX
Market Directional Index added 0.71 per cent.
“Hedge fund managers have continued to navigate the surge in bank
and financial risk volatility, with historic dislocations,
chaotic, frenzied trading and structural uncertainty conditions
unlike anything since 2008, or possibly even prior to that,”
Kenneth Heinz, president of HFR, said. “Given this surge in
volatility, comparable in magnitude to 2008, the worst year in
the history of HFRI performance, managers posted gains in May
across a range of equity, credit and trading oriented strategies
as weakness and risk concentrated in regional banks dominated
financial market conditions, culminating with the closure and
sale of First Republic Bank.”