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.”