Credit Suisse Broad Index Rises 0.86 Percent In March

Early estimates indicate the Credit Suisse Tremont Hedge Fund Index (Broad Index) will finish up 0.86% in March (based on 55% of assets reporting). March started off with a challenging week for equity markets in which the S&P 500 reached

By None

Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index (Broad Index) will finish up 0.86% in March (based on 55% of assets reporting).

March started off with a challenging week for equity markets in which the S&P 500 reached a 12-year low and was down 57% from its October 2007 peak, helping erase $37 trillion of equity value globally according to Bloomberg.

Positive news regarding January and February revenues from Citibank and other financial institutions sparked three-week 20%+ rallies in the S&P 500 and Dow Jones indices. These were accompanied by strong equity rallies worldwide, and were further stoked by positive revenue announcements from other major banks, as well as US Treasury Secretary Timothy Geithners proposal to buy toxic assets from financial institutions, and other upbeat indicators.

Long/Short Equity managers had a wide dispersion in performance since many were defensively positioned going into the rally, and their overall performance of 2.3% was low relative to the equities returns, such as the 7.2% performance of the MSCI World Index.

Not surprisingly, Dedicated Short Bias was down 4.9% for the month, after having two strong months in January and February. Multi-Strategy funds captured upside participation with a return of 1.6% for the month.

Bond markets were buoyed by quantitative easing announcements both in the UK on 5 March, and in the US on 18 March. The 10-Year US Treasury yield had a one-day change from 3.0% to 2.5%, but ended the month at 2.7% with the volume of several auctions of new issuances bringing yields back to half of their initial rally.

The 10-Year Treasury, which had its all time low of 2.0% in December, has averaged 4.3% over the past five years. The Fixed Income Arbitrage strategy was a beneficiary, ending the month up over 2.6%.

Global Macro is expected to extend its winning streak to five consecutive positive months returning 0.5% in March. The strategy showed versatility by doing well in January and February when equities were significantly challenged, as well as in a month in which equities had a 20%+ rally.

Many Global Macro managers had been in and out of curve steepeners over the past year; however, as a substantial flattening took place following the Federal Reserves quantitative easing announcement, some profited by making tactical shifts along the curve or taking long government bond biases.

Commodities indices were up despite a 5% correction in oil prices at the end of the month (oil is up 17% for 1Q 2009, however). Gold sold off as the equity rally brought optimism to the market and finished the month at $917 a Troy ounce.

L.D.

«