Hedge funds globally recorded their strongest monthly performance since November 2020, as managers capitalised on a robust rally in technology stocks throughout April. A global hedge fund index compiled by data group HFR surged 5 per cent for the month, driven significantly by technology-focused funds which climbed 14 per cent. This resurgence coincides with broader market strength, with the S&P 500 index of US blue-chip stocks soaring 10.4 per cent and the tech-heavy Nasdaq Composite rising 15.3 per cent, marking its best month since April 2020.
The impressive gains were underpinned by strong corporate earnings and continued investment from major technology companies, alongside what one industry expert described as “exuberant behaviour on memory stocks”. Key technology firms saw significant surges; Alphabet jumped about one-third, boosting its market capitalisation, while chip makers Intel and AMD more than doubled and soared 74 per cent respectively. SanDisk, a specialist in memory chips, also rose 73 per cent. Hedge funds are alternative investment funds that often use complex strategies, including leveraging borrowed money and taking both long and short positions, to generate returns for accredited investors. Their net leverage reportedly increased in April as managers purchased more stocks than they sold.
This positive shift marks a dramatic rebound from March, when the industry faced some of its worst losses since the COVID-19 pandemic began. Funds anticipating interest rate cuts were particularly impacted by a sudden market pivot towards pricing in rate increases, following geopolitical events. While macro hedge funds, which bet on bonds and currencies, lost nearly 2 per cent in March, they rebounded 1.6 per cent in April. The recent relative stability in markets, reflected by the Vix indicator of volatility falling below its long-term average, also aided highly leveraged funds in capitalising on the upturn, with several prominent funds reporting strong gains. Marshall Wace’s $US23 billion Eureka fund, for example, was up 7 per cent for the month, contributing to 7.9 per cent year-to-date gains.
