Long only hedge funds can finally celebrate a bit (at least a bit)… As we look at the returns for the first quarter of the year from Long/Short equity hedge funds, we have yet to see a fund that has not detracted in its short portfolio. Despite of the underperformance on the short side, all of them have managed to churn out sizeable returns overall in the last quarter.
Outperforming long only hedge funds Lead and lagging shorts is not an unusual thing with hedge funds (especially in a market which has gone up), but it became more pronounced in the last quarter with a strong market environment. According to EurekaHedge‘s indices, Long/Short Equity strategy (for Long Only Hedge Funds ) was up 4.66 percent while the Long-Only Absolute Return Fund Index gained almost 5 percent in the same period. HFRI Short Bias Index was down 1.7 percent in March and an average Short biased hedge fund detracted by -4.8 percent in Q1, according to Hedge Fund Research.
Take the example of Karsch Capital which was up 10 percent in the long-only portfolio but gained only +4.4 percent in its L/S fund, and Karsch Capital Ltd. Tiger cub Andreas Halvorsen’s Viking Global had similar luck with its Viking Long Fund which returned +10.1 percent in Q1 but the L/S allocation Viking Global Equities was up only 5.5 percent in comparison. Another following the same road has been Odey Absolute Return, whose long portfolio was up 3.35 percent in March but short equities lost more than 1 percent.
Clareville Capital’s UK L/S equity Pegasus Fund has gained a whopping 24 percent in the first quarter, but has barely managed to stay profitable in its short portfolio despite gaining outsized returns in its long equities. In last quarter, Pennant Capital’s Broadway Gate lost more than 5 percent in its short portfolio on a gross basis while returning more than 14 percent in the long portfolio, and a similar story prevails in Pennant’s Winward fund.
According to Eurekahedge, other winning strategies of this year so far have been Event-Driven, Distressed Debt and Fixed Income, which were up 4.03, 5.45 and 4.93 percent for the year until the end of Q1. The Fixed Income strategy added a 3.22 percent return in March alone. EurekaHedge Japan index has beaten the return on all other regional indices with a +10.7 percent in Q1 alone.