Hedge funds in black in March, but trail S&P for year

Date: Friday, April 8, 2011
Author: Svea Herbst-Bayliss, Reuters

Hedge fund managers are up for the year but lag S&P

Many managers caught off guard by events in early March

(Reuters) - Hedge fund managers eked out tiny gains in March and are up for the year, according to data released on Thursday but the asset class again lagged the broader stock market.

The average hedge fund inched up 0.31 percent in March and is now up 1.99 percent for the year, data from Hedge Fund Research show. The broader Standard & Poor's 500 stock index ended the first three months up 5.43 percent even though it slipped 0.10 percent last month.

In the first two months of 2011, hedge funds climbed 2.08 percent, lagging the Standard & Poor's 5.53 percent rise.

Technology and healthcare-oriented funds were some of the strongest gains, inching up 0.85 in March, HFR reported. But funds that concentrate on energy and basic materials lost 2 percent, and so-called macro funds that make bets on currencies and interest rates slipped 1.71 percent, the HFR numbers showed.

Many hedge funds were caught off guard by the natural disasters in Japan and the crisis in the Middle East at the start of the month, industry experts said.

"Many hedge funds were 'whipsawed' as they became more defensive mid-month as risks increased, which resulted in less participation during the late month rebound," Charles Gradante, co-founder of Hennessee Group, another firm that tracks hedge fund performance, said on Thursday.

For some of the industry's biggest stars, the first quarter was mixed as many found their bets on banks and that the economy would rebound more swiftly lose ground.

Billionaire stock picker John Paulson's Advantage Fund, where the bulk of his firm's assets are invested, lost 1.24 percent during the first quarter, pulled down by a 3.10 percent loss in March. His Advantage Plus Fund lost 1.74 percent during the first three months of 2011 after having dropped 4.4 percent in March. Some of his other portfolios are up, including the arbitrage-oriented Paulson Partners which gained 3.86 percent during the quarter, and the Paulson Enhanced which rose 6.94 percent during the first three months.

Meanwhile, activist investor William Ackman's Pershing Square International Ltd Fund, which manages the bulk of the firm's $9 billion in assets, inched up 0.7 percent last month to be up 0.7 for the quarter.

The Caxton Global Investment fund was off 2.37 percent through March 29 and Paul Tudor Jones' Tudor BVI Global Fund was off 0.47 percent through March 25.

Even Dan Loeb's Third Point Offshore fund was off a smidgen through March 23, but that did little to dampen his 6.78 percent gain for the year, ranking it among the industry's top performers for the year, according to data from HSBC Private Bank.