Equity hedge funds struggled in April, losing 0.70% for the month according to J.P. Morgan’s Prime Brokerage Global Hedge Fund report, making it their worst month since losing 0.97% in January and pulling YTD returns down to 0.47% compared to 2.56% for the S&P 500 (INDEXSP:.INX).

Ironically, part of the reason equity hedge funds took a hit in April because they were ready for the sell-off that took place early in the month. Correlations and volatility started to rise, but markets recovered quickly and managers that had prepared for a more sustained correction weren’t positioned to take advantage of the rally in the second half of the month.

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Equity hedge funds: Fixed income beats other strategies and the S&P 500 YTD

Fixed income relative value funds entered their eighth straight month of gains with a 0.69% return, making it the best performing strategy in April and for the year (2.95% YTD). Relative value benefited from investors who continued to buy Treasuries and structured credit, which gained 0.85% for a YTD return of 4.04%. Event-driven funds were narrowly positive, up 0.10% in April (1.97% YTD) as healthy funding markets, balance sheets flush with cash, and weak organic growth all incentivize companies to look for opportunities to buy growth.

Global macro picked up 0.11% in April (down 0.43% YTD) both because they were poorly positioned for the late rally in equities, and because many of them expected US Treasury prices to rise. “The most noteworthy trend in April was the continued slide in global bond yields, which negatively impacted a number of hedge funds that had positioned themselves for an uptick in rates,” write J.P. Morgan analysts Alessandra Tocco, Kenny King, and Christopher M. Evans.

Five-year Treasuries fell 4 bp and 10-year Treasuries fell 7bp pushing yields to 1.68% and 2.65%, still within the range it has held for the last three months.

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Gross leverage up slightly in April

Gross leverage for J.P. Morgan’s Prime Brokerage accounts ticked up from 1.82 to 1.83 last month, while net exposure fell from 0.85 to 0.84 and net leverage fell from 0.72 to 0.71. While the entire portfolio shifted to be slightly shorter, the US Prime Brokerage book had net covering. There was also net buying in Europe, and increased short exposure for ETFs and corporate bonds.

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