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Hedge funds outperformed the broader market by the biggest margin since the global financial crisis of 2008 in March, fulfilling their mission as a defensive investing option.
The Eurekahedge Hedge Fund Index beat its benchmark, the MSCI AC World Index, by 9.22 percentage points in March. The index lost 4.77% during the month. For context, the S&P 500 SPX, -2.20% lost 12.5% in that time.
“Preliminary estimates showed that 81.8% of the hedge-fund managers were able to outperform the global equity market in March,” Eurekahedge said in a statement, “exemplifying the downside protection afforded by hedged strategies as opposed to long-only portfolios.”
For the first quarter of the year, the index lost 6.52%, also doing better than most of the better-known stock indexes. The Dow Jones Industrial Average DJIA, -1.86% notched its worst first quarter on record, according to Dow Jones Market Data, tumbling 23.2%.
In March, funds with a “trend following” strategy did the best, returning 5.62%, while those with structured credit were the biggest losers, with losses of 24.5% during the month.
See:Hedge-fund returns badly lagged the stock market in 2019
During the long bull market that followed the 2008 crisis, active managers of all kinds, not just hedge funds, mostly struggled to keep up with the broader market. But the hefty fees charged by hedge-fund managers attracted criticism and caused some investors to withdraw money. Throughout 2019, a year in which broader stock markets notched one record after another, investors pulled more money out of hedge funds in a decade.
But some hedge-fund managers, like Pershing Square’s Bill Ackman, took aggressive steps to protect their portfolios as the coronavirus crisis loomed larger in February. Ackman famously spent $27 million to buy credit protection in early 2020, a bet that returned $2.6 billion by late March.
Related:More evidence that passive fund management beats active
