Key Takeaways
- • Trend-following hedge funds and CTAs posted gains of 2–3% in April 2026, extending momentum into double-digit year-to-date territory after recovering from severe March drawdowns tied to Iran conflict geopolitical tensions.
- • Global hedge funds experienced their worst monthly performance since January 2022 in March, with average long–short returns declining 3.96%, driven by equity sell-offs (S&P 500 down 4.63%, Nasdaq 100 down 4.87%) and regional weakness in Asia (-7.3%), Europe (-6.3%), and the U.S. (-4.3%).
- • Systematic trend-following strategies proved resilient relative to traditional long–short managers, with systematic long/short funds gaining 1.07% in March through alpha-driven trades while diversified CTA funds fell approximately 4% and broader trend indices declined over 2%.
- • Hedge fund gross leverage reached 312.5%, approaching record highs, as managers aggressively sold global equities for a fourth consecutive month at the fastest pace in over a decade, signaling crowded trade unwinding and factor dislocations across asset classes.
- • Technology, media, and telecom sectors bore the heaviest losses, down 7.8% in March and 11.8% over Q1, while positioning misalignment—overweight European and South Korean equities, underweight software—compounded losses for equity long–short strategies during volatile market moves.
Summary
Trend-following hedge funds and commodity trading advisers mounted a sharp recovery in April 2026, posting gains of 2–3% for the month and extending year-to-date returns into double-digit territory, according to performance data reviewed by institutional investors. This rebound followed a punishing March that marked the hedge fund industry's steepest monthly drawdown since January 2022, driven by geopolitical escalation in the Middle East that triggered broad market dislocations across equities, commodities, and currencies. The recovery underscores the cyclical nature of systematic trend-following strategies, which faced severe headwinds during March's violent reversals but began capturing directional moves once market dynamics stabilized.
March proved particularly damaging for traditional long–short equity strategies and diversified hedge fund portfolios. The S&P 500 declined 4.63% and the Nasdaq 100 fell 4.87% during the quarter, erasing gains from 2025's strong performance. Average long–short hedge fund returns fell 3.96% in March, with significant regional variation: Asia-focused long/short managers declined 7.3%, European funds dropped 6.3%, and U.S. funds fell 4.3%. Year-to-date through March, Asia long/short managers remained positive at 6.5%, while European and U.S. funds slipped into negative territory at -1.8% and -2.4%, respectively. Systematic trend-following strategies bucked the broader weakness, posting a 1.07% gain in March through alpha-driven trading, while diversified CTA funds nonetheless suffered losses of approximately 4% as sharp futures moves disrupted longer-term trend models. The Société Générale Trend Index fell to -0.34% month-to-date by early April, extending its year-to-date decline to -4.98%.
Sector concentration and crowded positioning amplified losses across the hedge fund complex. Technology, media, and telecom equities bore the brunt, declining 7.8% in March and 11.8% over the full quarter. According to JPMorgan strategists, many managers had adopted similar positioning—overweight European and South Korean equities while underweight software stocks—a stance that proved costly as market dynamics reversed. Bruno Schneller of Erlen Capital Management attributed the volatility to geopolitical tensions and rapid movements across interest rates, currencies, commodities, and equity factors, highlighting how factor dislocations and rapid deleveraging affected even diversified portfolios. Hedge funds sold global equities for a fourth consecutive month at the fastest pace in over a decade, with gross leverage climbing to 312.5% as North American funds recorded their largest net selling since April 2020. Short positions exceeded long positions among large U.S. multi-strategy firms, which suffered significant monthly and quarterly losses, whereas some Asian counterparts demonstrated relative resilience with modest quarterly gains despite March declines.
The unwinding of crowded trades accelerated during the conflict-driven volatility, with prime brokerage data from Goldman Sachs showing short exposure in equity exchange-traded funds rising 8.3% in the week through March 6. Oil prices surged above $100 per barrel for the first time since 2022, erasing trillions of dollars from global equity markets. Both HFR and Société Générale indices documented the strain on systematic investors, with HFR's diversified CTA funds falling roughly 4% and the Société Générale trend-following index declining more than 2% for March. The HFRX Equity Hedge Index, a standard benchmark for long–short equity performance, declined approximately 3% during the month. April's recovery in trend-following funds suggests that markets have stabilized sufficiently for systematic strategies to re-establish directional positioning, though the month's sharp reversals underscored the structural vulnerabilities facing crowded hedge fund positions during periods of rapid cross-asset repricing.
March proved particularly damaging for traditional long–short equity strategies and diversified hedge fund portfolios. The S&P 500 declined 4.63% and the Nasdaq 100 fell 4.87% during the quarter, erasing gains from 2025's strong performance. Average long–short hedge fund returns fell 3.96% in March, with significant regional variation: Asia-focused long/short managers declined 7.3%, European funds dropped 6.3%, and U.S. funds fell 4.3%. Year-to-date through March, Asia long/short managers remained positive at 6.5%, while European and U.S. funds slipped into negative territory at -1.8% and -2.4%, respectively. Systematic trend-following strategies bucked the broader weakness, posting a 1.07% gain in March through alpha-driven trading, while diversified CTA funds nonetheless suffered losses of approximately 4% as sharp futures moves disrupted longer-term trend models. The Société Générale Trend Index fell to -0.34% month-to-date by early April, extending its year-to-date decline to -4.98%.
Sector concentration and crowded positioning amplified losses across the hedge fund complex. Technology, media, and telecom equities bore the brunt, declining 7.8% in March and 11.8% over the full quarter. According to JPMorgan strategists, many managers had adopted similar positioning—overweight European and South Korean equities while underweight software stocks—a stance that proved costly as market dynamics reversed. Bruno Schneller of Erlen Capital Management attributed the volatility to geopolitical tensions and rapid movements across interest rates, currencies, commodities, and equity factors, highlighting how factor dislocations and rapid deleveraging affected even diversified portfolios. Hedge funds sold global equities for a fourth consecutive month at the fastest pace in over a decade, with gross leverage climbing to 312.5% as North American funds recorded their largest net selling since April 2020. Short positions exceeded long positions among large U.S. multi-strategy firms, which suffered significant monthly and quarterly losses, whereas some Asian counterparts demonstrated relative resilience with modest quarterly gains despite March declines.
The unwinding of crowded trades accelerated during the conflict-driven volatility, with prime brokerage data from Goldman Sachs showing short exposure in equity exchange-traded funds rising 8.3% in the week through March 6. Oil prices surged above $100 per barrel for the first time since 2022, erasing trillions of dollars from global equity markets. Both HFR and Société Générale indices documented the strain on systematic investors, with HFR's diversified CTA funds falling roughly 4% and the Société Générale trend-following index declining more than 2% for March. The HFRX Equity Hedge Index, a standard benchmark for long–short equity performance, declined approximately 3% during the month. April's recovery in trend-following funds suggests that markets have stabilized sufficiently for systematic strategies to re-establish directional positioning, though the month's sharp reversals underscored the structural vulnerabilities facing crowded hedge fund positions during periods of rapid cross-asset repricing.
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