By Christine Idzelis
Hedge funds have just had their best start to a year in more than a decade, with North American managers standing out for relatively strong performance, according to Eurekahedge.
Globally, hedge funds gained about 4.8% in the first three months of 2021 for their strongest first quarter since 2006, Eurekahedge said in a statement Wednesday. About 73% of the Eurekahedge Hedge Fund Index’s constituents have seen positive returns this year, with their performance benefiting from — but not beating — last month’s rally in global equity markets.
Global hedge fund gains of about 1% in March trailed the 3.2% return of the MSCI ACWI (Local), according to the statement. In the U.S., the S&P 500 index (S&P:SPX) rose 4.2 percent last month, bringing first-quarter returns to about 5.8%, while the Dow Jones Industrial Average (DOW:DJIA) was up 6.6% in March for a 7.8 % first-quarter gain, FactSet data show.
But hedge funds have been staging a comeback as the pandemic persists into 2021 and the U.S. seeks to prop up the economy with President Joe Biden’s $1.9 trillion economic stimulus package. North American hedge fund managers delivered 6.8% gains in the first quarter, beating their regional peers, according to Eurekahedge.
Meanwhile, cryptocurrency hedge funds have soared this year, outperforming bitcoin with a 117% return in the first three months of 2021, Eurekahedge said. Bitcoin (COINDESK:BTCUSD) returned 104 percent over the same period, according to its statement.
But some investors worry the crypto market is filled with speculative behavior. Bank of America’s latest monthly fund manager survey found that 74% of those probed believe bitcoin is in a bubble.
The hedge fund industry has meanwhile drawn some concern this year after Archegos Capital Management , the family office of Tiger cub Bill Hwang, imploded on wrongway leveraged bets . So-called Tiger cubs have ties to famed hedge fund manager Julian Robertson, who ran Tiger Management.
The meltdown rippled across Wall Street, with Credit Suisse Group saying earlier this month that its losses from firesales linked to Archegos amounted to about $4.7 billion. That’s left some market questioning whether highly levered hedge fund bets could similarly, suddenly surprise markets and potentially destabilize them.
While the overall performance for hedge funds may be seen as upbeat in 2021, Eurekahedge cited “struggles for some of the larger asset managers over the year.” That’s its reading based on the performance of the Eurekahedge Asset Weighted Index – USD, which is up just 1% this year after declining 0.2% in March.