Hedge funds were flat in March, but they still posted their best opening quarter since 2006, by making 4.9%.
In the first three months of 2006 the industry made 5.9%, but then stumbled from May to July to post 12.9% for the whole year, according to data providers Hedge Fund Research.
Last month, gains in equities, event-driven and arbitrage strategies offset losses from global macro declines.
Hedge fund investor Financial Risk Management noted technically-oriented managers did the best last month as falls in correlations between and within asset classes from peaks late last year has helped statistical arbitrageurs.
Hedge funds seemed to boost exposure overall, by leverage, though they did not significantly change their proportionate exposure to long positions versus shorts, FRM noted.
"Looking ahead, we expect that the gentle rebuilding in risk exposures will continue. This tentative trend has been evidenced by the increases in the margin to equity ratio of systematic trading managers and also in the small additions to gross exposures by equity long/short managers, particularly in the US.
"The increase in risk appetite in the hedge fund community, thus far, has not been very sizeable nor has it been very quick to accumulate. The performance of the industry reflects the cautious tone that managers have somewhat ubiquitously adopted so far this year."
"Systematic trading portfolios are currently in transition with the bias gradually moving away from risk-off, and towards risk-on. This leaves these portfolios in a stronger position to make money if market prices push higher and in the absence of a sharp reversal in trends."
In the first quarter, equities strategies posted 7.3% - the best opening period since 2000 - as equity markets rallied starkly.
This was roughly the same first quarter performance as by emerging markets hedge funds, which can often diverge strongly from equity hedge funds overall.
Event-driven funds made 4.5% by March, on the back of gains each month.
Global macro, a strategy many investors thought would perform well in this year's turbulent political landscape, has not yet, by making 1.2% in the quarter. It lost 0.9% in March.
The similar strategy of managed futures - but driven by computers rather than humans - fell 0.7% in March, but is up 0.5% this year, according to rival data monitors Eurekahedge.
CTA managers did, however, shield investors from a 4.14% fall in the DJ UBS Commodity index, and 2.4% decline in the S&P Goldman Sachs Commodity index, which were hit by the 22% plunge in natural gas prices during March, amid concerns over speculation of release of strategic reserves, and in light of lower demand as Chinese growth slows.
Eurekahedge called hedge funds' performance in March "a breather" as the industry fell 0.14% while MSCI World made 0.39%.
They noted the first quarter performance of long/short equity, multi-strategy and relative value funds was the best for each strategy since the third quarter of 2009.
In addition, relative-value managers reached $50bn total assets for the first time on record, and more than 100 new funds joined the $1.76trn industry last quarter.
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