March was as much a liquidity crisis as it was a response to the economic impact (actual and presumed) of COVID-19, writes Toby Goodworth, managing director of bfinance, a UK financial advisory company, in a recent report.
Findings in the report show:
- Realized volatility topped 100% for the first time since 2008, probably exacerbated by concurrent quarter-end expirations of options and futures on stocks and indices as well as challenging liquidity conditions.
- Pure trend-following was one of the standout strategies in March. The HFRI Macro Systematic Diversified index posted gains of +2.9% for the month, while the SG Trend index was up over 1.8%.
- The HFRI Equity Hedge index posted losses of -9.5% in March. Yet we note a huge degree of dispersion in monthly returns, with losses of 20% at one end of the spectrum and 20% gains at the other.
- While the HFRI Macro index gained 1% in March, some well-known fixed income macro funds posted their best ever returns while other Global Macro managers reported losing more than half of their portfolio value.
- The broad HFRI Relative Value index reported losses of -6.5% in March, although several of the sub-strategy indices posted significantly deeper losses (Fixed Income RV down -8.4% and the carry-focused Yield Alternative strategy down over 18% for the month).
- “Academic” ARP (alternative risk premia) strategies, which exploit well-documented premia (e.g. value, carry, momentum) in market-neutral formats, lost 4.4% on average.
“It is unsurprising that the very diverse MultiAsset sector delivered negative performance in March. That being said, average losses were contained to the mid-to-high single digits and certain strategies delivered some impressive capital preservation”, wrote Goodworth.