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Hedge Funds Sag in Volatile March

Date: Friday, April 4, 2008
Author: Maggie Shea, Lipper Hedge World

NEW YORK (HedgeWorld.com)—All six strategies tracked by the Dow Jones Hedge Fund Indexes posted net-of-fees losses in March as the credit crisis continues to run its course on global markets.

Convertible arbitrage funds fell 4.55% in March, likely because of the bearish direction of the market and higher premium costs induced by the surge in volatility. Their year-to-date return fell to negative 4.73%; they returned a flat negative 0.02% in February.

It was a similar story across other strategies. Although four of the strategies saw gains in February Previous HedgeWorld Story, the March losses kept each of their year-to-date returns in negative territory.

After returning 1.49% in February, equity long/short funds lost 1.6% last month, bringing their year-to-date return to negative 6.23%. Those funds are struggling to regain ground after they were rocked by a 6.12% loss in January Previous HedgeWorld Story. The Dow Jones Wilshire 5000, the broad measure of domestic equities, actually outperformed equity long/short hedge funds, returning negative 0.69% last month. For the year-to-date, however, the Dow Jones Wilshire 5000 is down 9.52%. The global equity markets, as measured by the Dow Jones Wilshire Global Index, were down 1.6% in March; year-to-date they have declined 9.33%.

Equity market neutral managers led all the other strategies in March, down 0.06%. Year-to-date those managers are down 0.52% after posting a 0.63% gain in February. Merger arbitrage managers, coming off of a 1.95% return in February, fell 0.92% in March. Year-to-date those managers are down 0.4%, leading all other strategies' performances for the year.

Distressed securities funds have yet to see a positive month in 2008—they lost 0.63% in March to bring their year-to-date return to negative 4.74%. Those funds were down 0.51% in February. Event-driven funds also posted lackluster returns in March, down 0.47%. Year-to-date those funds are down 1.47%; they gained 0.86% in February.

Final March performance figures will be available toward the end of April, according to Dow Jones Hedge Fund Indexes.