Hedge funds posted a sharp decline in March as the Iran military conflict escalated and oil prices spiked, resulting in a historic surge in volatility and steep declines across equity and fixed income markets as investors re-priced risk and positioned for higher interest rates in 2026.
The HFRI Fund Weighted Composite Index (FWC) declined -2.8 percent in March, the first monthly decline since April 2025, with losses led by Equity Hedge and Emerging Markets focused funds, as reported today by HFR.
The March decline was the largest since June 2022 and pares the 1Q26 gain for the HFRI FWC to +0.9 percent. The HFRI Long Volatility Index advanced +2.4 percent for the month as financial market volatility spiked.
“Financial markets performance whipsawed throughout March as a result of the Iran military conflict, resulting in historic spikes in volatility and oil prices, as well as significant disruptions and dislocations across global markets.
Equity Hedge funds posted the largest monthly decline since the beginning of the global Covid-19 pandemic in March 2020, with significant losses in Fundamental Growth and Emerging Markets-focused funds,” stated Kenneth Heinz, president of HFR.
“March was dominated by rapidly changing news headlines and daily shocks leading to significant intra-month and intra-day reversals in asset prices. While growth and equity strategies were most impacted by this volatility, credit, fixed income and arbitrage strategies generated mixed performance.
Having navigated the March financial market environment, hedge funds are and continue to be positioned both tactically and opportunistically to operate as liquidity providers and monetize opportunities created by these extreme market conditions and dislocations.”