Hedge funds lose more ground in March: data

NEW YORK (Reuters) - Hedge funds, which often promise to deliver positive returns in all markets, posted losses in the first quarter as tumbling stock markets and fears about sluggish growth took a toll, new data released on Monday show.

According to preliminary data from the BarclayHedge Fund Index, the average hedge fund lost 2.40 percent in March and is now down 4.4 percent since January. Many industry analysts said the first quarter would be the worst ever for hedge funds. Final numbers will not be known for some time.

Preliminary data from the Hennessee Group show hedge funds slipped 1.9 percent in March and are now off 3.5 percent for the year, while Hedge Fund Research data show the loosely regulated portfolios dropped 2 percent in March to be off 2.8 percent in the quarter.

"Following a strong recovery in February, hedge funds suffered another setback in March," said Sol Waksman, founder and president of BarclayHedge, adding: "At this point, 78 percent of the hedge funds on our platform have reported a negative return for March."

All major U.S. stock indexes fared better in march with the broad Standard & Poor's 500 index dipping only 0.6 percent in the month.

Still, hedge funds are still delivering on their promises to do better than the broader stock market, investors noted. The Standard & Poor's 500 index is off 9.9 percent.

"Are you going to fire your hedge fund manager for being off 5 percent when the index is off 10 percent, probably not," said Bradley Alford, founder of hedge fund advisory firm Alpha Capital Management.

"This is the time we are looking for hedge funds to kick in and perform," Michael Travaglini, the executive director of the $52 billion Massachusetts state pension fund said about the fund's investments in this red-hot asset class. "For years, they didn't have volatility, but now they have plenty."

Funds specializing in convertible arbitrage were among the worst performers with a 3.82 percent loss in March, Hedge Fund Research data show. In terms of regional focus, funds that specialize in emerging markets lost 5.13 percent and emerging markets that focus on Asia lost even more, dropping 8.8 percent, HFR data show.