March 2020 will surely be remembered as a major turning point for financial markets in the modern era. Following on from our previous update, this research note looks in detail at the performance of several core liquid alternative strategies through March 2020 and Q1, now that month-end NAVs are available.
Across the liquid alternative universe, outright positive monthly returns were few and far between during March, although there were several notable bright spots among certain strategies and specific managers. A “win” in March generally constituted limiting losses to low single digits or better – still extremely valuable to portfolios, of course, in diluting the losses in long-only risk assets.
For many strategies, the second half of March was particularly challenging: widespread de-risking resulted in further downward price pressure, exacerbated by heightened illiquidity and extremely wide bid/ask spreads. This was particularly evident in fixed income and currency markets, where spreads in usually highly liquid instruments widened by many multiples. In this respect, March was as much a liquidity crisis as it was a response to the economic impact (actual and presumed) of Covid-19.
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