The U.S. Federal Reserve (Fed) confirmed their patient posturing during the March meeting. The Fed is now projecting no hikes for the remainder of 2019, in-line with market expectations. They also indicated the run-off of their balance sheet will end in September. The result was decline of 25 – 30 basis points across most points of the treasury curve. While large cap equities generally moved higher, there remained concern about a slowdown in global growth. The Fund’s top exposure, information technology, was once again the top sector. However, another key sector, industrials, struggled under the global growth concerns, resulting in long/short equity lagging other strategies.
Event driven strategies had solid performance due to new developments on a large and widely held pharmaceutical transaction. An activist investor had launched a campaign to oppose the merger, but dropped their resistance in March. The companies eventually received shareholder approval, with the target gaining +13%. Completion of a large media transaction that had been in the works for more than a year also contributed to performance.
Relative value strategies were mixed, overall producing modest positive performance. Equity oriented strategies benefitted from the upward movement in large cap equities, while credit oriented strategies struggled. After two months of credit spread tightening, March saw spread widening for lower rated credits.
Macro strategies had the best performance as the emergence of trends enabled systematic managers to profit. Oil saw a fourth consecutive month of gains while natural gas saw an equal number of months of decline. The largest driver of returns was in fixed income, where managers were positioned for lower interest rates due to the dovish tone that has developed across central banks.