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.