Hedge funds sat out March stock rally

The March stock market rally left hedge funds in the dust, according to the latest report from Hennessee Group LLC. The Hennessee Hedge Fund Index gained 1.4% in March for a three-month gain of 1.1%. This compared with an 8.5% gain by the Standard & Poor’s 500 stock index over the same period. The S&P 500 was down 11.7% over the first three months of the year. The Barclays Aggregate Bond Index gained 3.3% in March and was virtually flat in the first quarter of the year, with a 0.1% gain. Hedge funds lagged in March because the stock market rally involved no change in the underlying fundamentals, according to Charles Gradante, co-founder of New York-based Hennessee Group. “Most hedge funds were caught with tight net exposures and were unable to participate in the rally,” he said in a statement. “Managers were also hurt as the sectors they have been heavily short, such as financials, consumer discretionary and materials, were the sectors that rallied the strongest.”