Alt Investments
Hedge Funds Set Scorching Returns Pace In April

It's an ill wind that blows no-one any good, and that familiar saying certainly applies to the hedge fund sector. In April, the industry chalked up some of the highest returns in more than a decade.
Hedge funds surged to the strongest monthly gain in over 10 years
in April, as managers positioned for the re-opening of global
economies which have been shut down as a result of the
coronavirus pandemic, figures from Hedge Fund Research show.
The Chicago-based firm’s HFRI Fund Weighted Composite
Index® rose by 4 .8 per cent in April from March, with gains led
by equity hedge, event-driven, energy/basic materials, and
activist strategies.
The investable HFRI 500 Hedge Fund Composite Index rose by 4.3
per cent for the month, recovering some losses to that
year-to-date performance is -5.3 per cent, far less severe than
the fall in the Dow Jones Industrial Average of equities over the
same period.
The monthly gain of the HFRI FWC represents the sixth-highest
month of performance in the history of the index, dating back to
January 1990. The top decile of HFRI FWC constituents rose by
19.7 per cent for the month, while the bottom decile fell by 4.1
per cent, representing a dispersion of 23.8 percentage
points.
“While the April recovery was both strong and broad-based,
managers are actively positioning for both continued,
high-realised volatility as well as the expanded opportunity set
for long/short investing, encompassing trading through the
current pandemic conditions and adjusting for the post-pandemic
environment. It is likely that the state of macroeconomic trading
and investing will remain volatile and fluid in coming months,
creating dynamic opportunities for managers to generate
outperformance through the remainder of the year,” Kenneth J
Heinz, president of HFR, said.
Hedge funds as a sector have sometimes struggled in the decade
ending in 2019 as conventional long-only investors were able to
chalk up robust returns from the bull market. Low volatility and
the benefits of central bank money printing squeezed hedge funds
and put pressure on their fees. But the spike in volatility and
huge market dislocations because of COVID-19 have boosted hedge
funds.
The equity hedge strategy area posted strong gains in April, led
by recoveries in energy/basic materials and fundamental value
sub-strategies.
The equity- and credit-sensitive HFRI Event-Driven (Total) Index
surged by 6.4 per cent in April, recovering from March declines
as both credit and equity markets rebounded from late March
lows.
Risk parity and systemic bank risk premia strategies also gained
for the month, with the HFR Risk Parity Vol 15 Index surging by
4.5 per cent, as equity, credit and commodities all
advanced.
Uncorrelated macro strategies also gained in April, led by
multi-strategy and discretionary thematic sub-strategies.