Hedge funds just posted their best quarter since 2009

Managers returned 5.9 per cent on a fund-weighted basis, posting their strongest showing since the third quarter of 2009, according to Hedge Fund Research Inc. The long-short equity strategy led the pack, gaining 7.9 per cent.

“For a lot of the strategies there is a dependency on the markets and the ongoing relatively benign economic environment that we live in,” said Ian Haas, Neuberger Berman’s head of quantitative and directional strategy research. “It does seem like a supportive environment for risk-taking.”

While 2019 has marked a turnaround, investors could still get more bang for their buck via the broader equity market: The S&P 500 Index returned 14 per cent through March, also marking its best quarter since 2009. The lagging performance may be due, in part, to managers’ reticence to jump into stocks. The industry suffered its biggest annual loss last year since 2011, declining 4.8 per cent on a fund-weighted basis as it got pummeled by market volatility.

Still, the revival has brought institutional investors flocking back to hedge funds as they seek market-beating returns and diversification, according to a JPMorgan Chase & Co. survey. About a third of respondents plan to boost allocations in 2019, up from 15 per cent in 2018.

Bloomberg’s preliminary data, released earlier, showed the industry posting a 4.9 per cent first-quarter gain.

Several of the biggest hedge fund managers such as Citadel, Point72 Asset Management and Balyasny Asset Management have made money for investors, returning 6.4 per cent, 4.8 per cent and 4.2 per cent, respectively, according to people with knowledge of the matter. Citadel’s Tactical Trading fund, which uses equity and quant strategies, was up 1.9 per cent in March and 5.2 per cent for the quarter.

Brahman Capital’s long-short equity fund, Brahman Partners II Fund, gained 2.1 per cent in March and 8.1 per cent in the last three months, according to people with knowledge of the matter.

Renaissance Gains

The Renaissance Institutional Equities Fund gained about 0.9 per cent in March and 4.7 per cent in the quarter, people said. That fund, known as RIEF, trades only US-listed equities and is biased toward those that Renaissance’s models expect to rise. Renaissance Institutional Diversified Alpha returned 1.7 per cent last month and 1.4 per cent for the quarter. Renaissance Institutional Diversified Global Equities, which employs a market-neutral strategy, climbed 1.8 per cent in March, pushing its year-to-date gain to 2.2 per cent.

Spokesmen for Brahman and Renaissance declined to comment.

Dan Loeb’s Third Point Offshore Investors Ltd. fund returned about 8.8 per cent through March. Bill Ackman’s Pershing Square Holdings Ltd. jumped 37 per cent.