March’s preliminary numbers, based on 55% of MSCI’s hedge fund universe reporting, came in lower than February’s 0.8% gain (See MSCI Hedge Fund Index Achieves Slight February Gain ).   However, the index performed better than the MSCI World Equity Index, which slid 0.6%.   For the year, the index is up 1.8%, far outperforming its World counterpart, which is down 5.5%, according to a MSCI news release.

Components

Unlike February, March was dragged down by negative returns in Directional Trading, those strategies based upon speculating on the direction of market prices of currencies, commodities, equities, and bonds in the futures and cash markets, which was 3.9% lower based on 60% of funds reporting.   Comparatively, Directional Trading was February’s biggest gainer, up 4.0%.

Otherwise gains were seen across the board.    March’s biggest gainer, based on 53% of funds reporting, was the Multi-Process Group, up 0.8%.    Likewise, gains were seen in Specialist Credit and Relative Value.  Specialist Credit funds, those that seek to lend to credit-sensitive issuers,become the second best performing process group for March with a 0.7% return on 56% of funds reporting.  Relative Value, strategies that focus on spread relationships between pricing components of financial assets or commodities, was up 0.6% on 53% of funds reporting.

March’s other gainer was the Security Selection Index, those managers who combine long positions and short sales with the aim of benefiting from their ability in selecting investments while offsetting systematic market risks.    Security Selection managed to reverse February’s negative 0.5% return, ending March 0.2% higher based on return data from 55% of funds.

The MSCI Hedge Fund Indices are composed of more than 160 indices. More than 1,700 hedge funds have agreed to participate in the database and there are over 1,100 hedge funds currently in the MSCI Hedge Fund Indices and Database.