While investors prepare for a rebound in the equity market, hedge funds are no longer posting the double-digit performances of the past, data from Van Hedge Fund Advisors show.
The economic rebound and the tremendous growth of the $550 billion hedge fund industry is dragging returns lower as too much money chases too few opportunities. Last year alone 1,000 new hedge funds were launched, raising the estimated global total to 6,000, according to Reuters.
Short selling and convertible arbitrage strategies performed particularly badly over the month. The index’s short-biased sub-component fell by 5.33% in March, bringing year to date returns for this strategy to a lackluster 0.6%. Since funds employing this strategy bet on stock prices falling, the market’s nascent recovery put a drain on performance.
The convertible arbitrage strategy, where managers buy convertible bonds and hedge them by purchasing the underlying stock, also disappointed investors in March. These funds. This sub-component increased by a mere 1.51% over the month, bringing the year to date total to 2.97%.