The PivotalPath Hedge Fund Composite Index was up 0.8% in March, bringing its year-to-date return to 4.2%. The firm’s March report said 62% of the managers it tracked posted positive returns, and more than 75% of funds were up for the first quarter.
PivotalPath said that dispersion was high during March at 3.7% at the composite level compared to the long-term average of 2.9%. The Equity Sector strategy had the highest level of dispersion across all strategies at 5.2%.
The equity Sector was also the worst-performing strategy for both March and the first quarter. The strategy was down 2.2% for March and is up 0.6% year to date. Interestingly, quant funds appear to have made a comeback last month, or at least, those tracked by PivotalPath did. Most quant funds had significant difficulties last year, with some of the largest ones posting negative or weak returns, although at least one quant fund managed a triple-digit return.
Equity Quant was the best-performing strategy, climbing from the bottom of the list to the top with a March return of 5.3%. That marks a 43% increase from the strategy’s previous record high of 3.7% in May 2009. U.S. Long/ Short Quant funds returned 5.6% on average, while Global Long/ Short Quant Funds were up 5.5% for the month.
Event-Driven hedge funds generated the most alpha during the first quarter. Equity funds generated the most alpha in 2020 and spent 20 months toward the top of the list of alpha generation strategies. In 2019 and 2018, the strategy was in second place by alpha generation. Equity Sector funds were in first place in 2017.
Event-Driven funds jumped from 9.3% in 2020 to 22.4% in the first quarter of this year. The rise of the Event-Driven strategy should be thought about in the context of a 12-month rolling calculation. When spreads blew out in March 2020 following the economic shutdowns, the firm explained that Event-Driven managers were hit with losses. They tend to run net-long with high beta most of the time. A year later, the plunge in March 2020 has rolled off and been replaced by solid performance in March 2021.
Performance by assets under management
More than 200 basis points separate the top-performing funds by assets under management from the bottom two cohorts. Smaller funds continue to outperform those with significantly more capital. In March, funds between $2.5 billion and $5 billion performed the best, followed by those with less than $100 million in assets.
Funds with between $100 million and $250 million are leading the way year to date. Funds with more than $5 billion in assets averaged a return of 0.6% for March and 3% year to date; They’re tied with funds between $1 billion and $2.5 billion for the last place on a year-to-date basis.