Play March's hedge fund head fake

The flight from hedge funds has been overblown, after winter's losing strategies turned a corner in March, one industry insider told CNBC Thursday.

"It's been a roller coaster," said Don Steinbrugge, managing partner at Agecroft Partners. "The first two months of the year, anything that had a lot of equity exposure, high yield or less liquid credit got killed. Those are the strategies that are doing really well in March."

Despite a March rally, hedge funds are wrapping up a "terrible quarter" after a rocky start to 2016, Steinbrugge said. He expects hedge funds to end the quarter 2.1 percent in the red. The pullback prompted onlookers, like those quoted in a recent Wall Street Journal article, to say the industry is falling behind.

But funds from some activists or distressed debt are poised for redemption, Steinbrugge told CNBC's "Fast Money: Halftime Report."

"If you look at the hedge fund industry, there are a lot of different strategies," Steinbrugge said. "And those that have been gaining assets over the past four or five months ... have been strategies that aren't correlated to the market. ... If they invest in those strategies and they do a good job, they deserve their fees."

Still, returns are not going to reach the highs of five or 10 years ago, Steinbrugge said.

"A lot of the low-hanging fruit is gone," Steinbrugge said. "Finding companies that have a massive amount of cash on the books, pay a big dividend or buy back stocks just doesn't exist any more."