In March, the stock market could not maintain the fast pace that began last summer. The S&P 500 index remained stable (+0.04%) despite continuously decreasing implied volatility (17.7%) over the past three months. For the first quarter of 2011, the S&P 500 Index registered a positive return (+5.92%) that was about half the level of its two previous double-digit quarterly returns.

On the fixed-income market, convertible bonds (+0.63%) managed a positive but conservative performance, whereas regular bonds (-0.36%) registered their fifth consecutive negative return. Similarly, the Lehman Global Bond Index failed to reach positive territory. After six months of substantial profits, the commodities market (+5.03%) remained strong and displayed yet another double-digit quarterly performance (+14.84%). The dollar (-0.91%) fell sharply, albeit less than in the three previous months.

In this context, most hedge fund strategies could not keep up with the trend of the past months. Hampered by the modest performance of convertible bonds and a shrinking credit spread (-0.19%), the Convertible Arbitrage (+0.23%) strategy struggled for profitability. Nonetheless, the strategy remained the best-performing hedge-fund strategy over the first quarter of 2011 (+3.70%).

Despite the booming commodities market and the receding dollar, the repeated losses of regular bonds impaired the performances of the CTA Global strategy (-1.67%) and drew its quarterly return (-0.57%) into negative territory. With a limited exposure to the stock market, the Equity Market Neutral (+0.91%) strategy managed a comfortable above-average return. Conversely, both the Event Driven (+0.17%) and Long/Short Equity (+0.21%) strategies could not generate much profit from the limited performance of stocks and scored below their average monthly returns.

Overall, the Funds of Funds (-0.11%) strategy underperformed the S&P 500 Index and did not manage to record a positive return.