(Bloomberg) -- Hedge fund returns increased 0.78 percent in April, reversing two consecutive monthly declines. The swing of 134 basis points was driven by gains in all seven tracked fund types as managers capitalized on plunging volatility and activist and special situation strategies.
For the first four months of 2018, hedge fund returns were little changed, according to data compiled in the Bloomberg Hedge Fund Database. Funds finished the first quarter down 0.56 percent.
The CBOE Volatility Index had its biggest monthly decline since July 2016, prompting hedge funds to cut bets on further market swings.
Overall, April fund returns were led by CTA/Managed Futures-type funds, which posted gains of 2.05 percent after a March loss of 0.27 percent. Discretionary and Systematic subsets of CTA/Managed Futures also rose for the month but remain among the year’s worst performers.
Currency sub-strategy funds were up 13.01 percent in April for the highest monthly gain since November 2013. For the year, this subset of CTA/Managed Futures is down the most of the 26 tracked sub-strategies at 6.03 percent.
Activist funds, buoyed by a move into rebounding technology stocks and away from faltering consumer staples, gained 2.86 percent in April, erasing March’s decline of 1.66 percent. That helped make activist funds tops both for the month and for year-to-date returns, with an increase of 7.49 percent.
Special situation sub-strategies, a subset of Event Driven funds, had the biggest monthly swing, with April returns rising 1.28 percent after being down 5.89 percent in March. Special situation funds look to act on material corporate events, such as buybacks. In April there were 11 buybacks of at least $1 billion by U.S.-listed companies, up from 8 in March.
Every fund type was in the black in April, with Long-Short funds outpacing the S&P 500, rising 1 percent compared with the benchmark’s 0.38 percent return. Fixed Income Directional posted the lowest returns at 0.06 percent.
Fund subsets in the black topped those in the red by 24 to 2 in April, with Emerging Market sub-strategies falling the most at 1.14 percent.
Mortgage-backed sub-strategies, one of the few to post back-to-back gains the past several months, rose 0.55 percent in April pushing the gain for the year to 2.78 percent. Agency mortgage bond trading volume topped $221 billion a day in April and $228 billion January to April, according to data compiled by the Securities Industry and Financial Markets Association.
- NOTE: Go to HFND and select option 3 to see the Bloomberg Hedge Fund Database Snapshot
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- NOTE: See CACT BBK for company share repurchase data
- NOTE: All data are total return including reinvested dividends. April data are the most recent available. May returns become available around June 15.
- NOTE: “Equity Hedge” refers to a Bloomberg-created term for strategies where the largest subset of funds is L/S Equity and Long-Biased hedge funds
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