The nearly $3 trillion hedge fund industry posted, by one account, its best performance in more than four years in March.
After years of lackluster returns, hedge funds are finding some footing.
The nearly $3 trillion industry posted its best performance in more than four years in March, by one account, though it still lagged the S&P 500 stock market benchmark. Preqin, which tracks the alternative asset industry, said its own benchmark for hedge funds rose 2.82 percent for the month, the best total since January 2012.
Equity strategies experienced a solid month, bringing home a return of 3.79 percent during a month where the S&P 500 jumped 6.3 percent, according to Preqin.
Emerging markets showed the best gains for the month, returning 5.85 percent, while macro-focused strategies fared the worst, rising just 0.2 percent.
Despite the boost from March, Preqin's All-Strategies Hedge Fund benchmark has declined 0.28 percent for the year. That trails the S&P 500, which was up about 1.6 percent of the year as of Wednesday afternoon trading.
Hedge funds have had a difficult run since posting some big years heading into the financial crisis. Nearly eight years of aggressive Fed policy have pushed basic market returns higher, but increasing correlations and dampened volatility have made it hard to generate outperformance.
"Although the returns in March are encouraging, half the leading strategies are still showing negative (year-to-date) returns," Amy Bensted, Preqin's head of hedge fund products, said in a statement. "The industry will need to show further recovery in the coming months to better the gains of 2015 and to win back investor favor."
Nevertheless, investors continue to pump money into funds, with assets climbing to $2.9 trillion at the end of 2015, a gain of $22.8 billion, according to HFR, which also tracks industry performance.
HFR's most recent numbers differ somewhat from Preqin, but still show solid gains in March.
The HFR Fund Weighted Composite Index rose 1.8 percent for the month, the best return since February 2015. The results also showed big contributions from emerging markets. HFR's Latin America Index rose 14.5 percent, the best monthly performance since December 1999.
Doug Kass, head of Seabreeze Partners Management and a veteran of the hedge fund industry, predicted on Wednesday "peak hedge funds." In a note, he suggested that while the industry isn't in danger of collapsing, the future for stock-picking funds "seems problematic for at least the next year or two."
Among the obstacles, he said, are poor performance, high fees and populist political backlash.