UPDATE 1-HFR hedge fund composite up 1.8 pct in March

(Adds detail from monthly performance update)

NEW YORK, April 7 (Reuters) - Hedge funds on average rose 1.8 percent last month, contributing to a 0.5 percent gain for the first quarter that outpaced public stock indexes, Hedge Fund Research Inc said in its March performance update.

Funds that invest in other hedge funds, meanwhile, fell 0.01 percent for the month. Funds-of-funds have eked out a 0.5 percent gain this year.

HFR’s widely-watched monthly performance figures showed that many fund strategies have rebounded this year after a disastrous 2008, even as U.S. stock markets post some wild swings. The S&P 500 Index of the largest U.S. company stocks surged 10 percent last month.

Still, the S&P 500 was down 10 percent in the quarter, making gains of less than 1 percent look favorable.

Some of the most successful fund styles last month included convertible arbitrage and pools focused on energy and basic materials.

The biggest decliners were short-seller funds, down 4.7 percent last month as stocks surged. Macro funds, after a strong 2008, were down in March and for the quarter.

Earlier Tuesday the Chicago-based firm’s HFRX Global Hedge Fund Index indicated funds slipped 0.03 percent in March. It was the benchmark’s second straight monthly decline, though returns this year are up 0.68 percent.

According to the indexes, prices of which are posted daily, the biggest losers last month were distressed securities funds, which fell 2.7 percent, and computer-driven diversified funds, down 2.4 percent. Distressed securities funds declined more than 5 percent in the first quarter.

Global macro funds fell 2 percent in March, setting investors back by 0.62 percent for the quarter.

Big winners last month included fundamental value funds, up 2.4 percent, which helped equity hedge funds overall rise 2.2 percent. (Editing by John Wallace, Bernard Orr)