Hedge Funds Hit by March Volatility: HFR

While March may have been good for those firm reliant on increased volumes, it was something of a horror show for hedge funds, with equity managers particularly hard hit, and Macro managers given up a substantial part of their early year gains as only 30% of funds reporting returns to HFR making money.

According to hedge fund indexation and analytics firm HFR, its Fund Weighted Composite (FWC) Index fell 3.32% in March, effectively taking out the year’s returns, the index ended the first quarter at +0.36%. The decline was the largest since June 2022, with Equity Hedge and Emerging Markets funds hit hardest, the former by 5.22%, the latter by 4.71%.

Macro managers also suffered, the HFRI Macro Index falling 2.98%, however, thanks to a particularly strong start to the year it remains +4.32% after Q1. The relatively better performance was thanks exclusively to commodity managers, the sub-index rising 2.3% in March, the only one to do so. The Macro Commodity Index is now +15.86% on the year.

Elsewhere in the Macro world, the HFRI 500 Discretionary Macro Index was -4.26%, while the Systematic Macro Index was -2.32%. Year-to-date, the former is effectively back to flat, while the latter remains +6.96%. The Multi-Strategy Index was -2.77% in March, now +0.85%, while the Trend Following Index was -2.57% for +5.82% year-to-date. HFR has discontinued the Macro: Currency Index.

The only glimpse of good news in the March report was from Relative Value funds, which ended a whole 0.01% in the black, year-to-date it is +1.77%. The HFR Cryptocurrency Index was -0.61% and remains in the red at -12.42% after the first quarter.

Performance dispersion expanded in March, as the top decile of the HFRI FWC constituents advanced by an average of +5.9%, while the bottom decile of constituents fell by an average of -13.7%. This represents a top/bottom dispersion of 19.6%. By comparison, the top/bottom performance dispersion in February was 15.2% and for the trailing 12 months ending March 2026, it was a massive 77.6%.

“Financial markets performance whipsawed throughout March as a result of the Iran military conflict, resulting in historic spikes in volatility and oil prices, as well as significant disruptions and dislocations across global markets,” observes Kenneth Heinz, president of HFR. “Equity Hedge funds posted the largest monthly decline since the beginning of the global Covid-19 pandemic in March 2020, with significant losses in Fundamental Growth and Emerging Markets-focused funds. March was dominated by rapidly changing news headlines and daily shocks leading to significant intra-month and intra-day reversals in asset prices.

“While growth and equity strategies were most impacted by this volatility, credit, fixed income and arbitrage strategies generated mixed performance,” he adds. “Having navigated the March financial market environment, hedge funds are and continue to be positioned both tactically and opportunistically to operate as liquidity providers and monetise opportunities created by these extreme market conditions and dislocations.”