The FTSE Hedge Global Index continued to deliver positive performance in March, posting gains of 1.05% in US dollar terms and 1.5% in sterling terms.
The biggest contributors to this performance were the directional style (+1.30%) and event-driven style (+0.92%), largely due to the strong performance of managers in the CTA/managed futures (+2.92%), equity hedge (+1.58%) and equity arbitrage (+1.27%) strategies.
The period was characterized by hawkish comments from the ECB and Bank of Japan regarding the future direction of interest rates, weaker than expected economic data in the US and concerns over global growth. The Bank of Japan stated that it would start cutting the level of excess liquidity in its banking system over the next few months, but reassured investors that it was not going to tighten monetary policy too rapidly.
Benign US inflation and housing data coupled with favorable news on inflation eased worries about the outlook for rising interest rates in the US. Developed equity markets posted gains of 1-4% despite these fears but the performance of Asian markets was mixed, with some delivering negative returns.
Equity hedge and equity arbitrage managers performed well in this environment. Global bond markets fell sharply in the first half of the month on concerns over rising interest rates, recovered slightly and then fell further towards the end of the period, posting overall losses of 2%.