Most hedge funds delivered positive returns in March, helped by a dovish ECB and Fed boosting appetite for risky assets.

All but two of Lyxor’s eleven hedge fund indices finished the month in positive territory, with the main gauge Lyxor Hedge Fund Index up 0.3%.

"Hedge funds delivered positive returns in March, supported by the bullish market environment and the dovish stance of the Federal Reserve," said Philippe Ferreira, director, senior cross-asset strategist at Lyxor Asset Management.

"Year to date hedge funds remain nonetheless in negative territory, though they outperform risk assets on a risk adjusted basis."

Fixed income arbitrage strategies put in some of the best performances last month, with hedge fund managers taking advantage of pricing anomalies between fixed income securities, sectors, markets and yield curves.

March was also a decent time for L/S Equity Long Bias strategies, where equities and equity derivatives are bought and sold on the basis of price expectations, while keeping a net long exposure to the equity market.

The main drag in March came, for once, from the CTAs which lost on the oil rally and to some extent on bonds.

CTAs started March with their energy exposure cut by half and a long position rebuilt in metals. Yet, the violent rebound in oil prices was a severe drag.

The drop in bonds until mid-March, engineered by a dovish Fed, was the other main source of losses.

While CTAs remain bearishly positioned they have substantially modified their allocations, Lyxor says. They reduced their long US bonds and turned short on the dollar.

They still hold a small energy short, but built up longs in both base and precious metals.