Hedge Funds Post Strongest Monthly Gains Since 2020 on Tech Rally

Hedge funds recorded their strongest monthly performance since 2020 in April as a rally in technology stocks drove gains across multiple strategies. A global hedge fund index compiled by data group HFR rose 5 per cent for the month according to preliminary figures, the largest increase since November 2020.

Technology-focused funds surged 14 per cent over the same period. The gains followed a difficult March when several funds posted some of their largest losses since the start of the Covid-19 pandemic in 2020. The rebound coincided with a ceasefire in the US-Israeli war with Iran and stronger-than-expected corporate earnings.

The S&P 500 index of US blue-chip stocks climbed 10.4 per cent in April, its biggest monthly gain since November 2020. The tech-heavy Nasdaq Composite advanced 15.3 per cent, its best month since April 2020. Alphabet shares rose about one-third during the month, lifting the company's market capitalisation to around $4.7tn.

Intel shares more than doubled while AMD shares increased 74 per cent.

Sandisk, a memory chip specialist, gained 73 per cent in April and has risen about 412 per cent so far this year. Hedge fund managers pointed to continued investment by tech hyperscalers and strong corporate earnings as factors supporting the rally.

Net leverage across hedge funds increased in April as managers purchased more stocks than they sold. One hedge fund manager highlighted gains among the largest and most liquid technology companies, including several of the Magnificent Seven stocks that rebounded during the month.

The relative stability in markets also supported multi-manager platforms that use leverage to amplify returns. The Vix volatility index fell from around 25 to less than 17 over the month, moving below its long-term average.

Macro hedge funds, which bet on bonds, currencies and commodities, lost nearly 2 per cent in March according to HFR data but recovered 1.6 per cent in April. Some managers noted that many funds had been positioned for interest rate cuts before the outbreak of conflict in the Middle East shifted market expectations toward higher rates to address potential inflation.

The recent performance has prompted questions from some investors about hedge funds' correlation to equity markets and exposure to crowded trades. Several large multi-manager hedge funds posted positive returns for April. One $23bn long-short equity fund rose 7 per cent during the month.

Other flagship multi-manager funds gained between 1.4 per cent and 3.1 per cent in April, though some remained slightly negative for the year.