NEW YORK, March 20 (Reuters) - Citadel's flagship hedge fund Wellington has reduced its losses after a rough start to March, as uncertainties around President Donald Trump's economic policies triggered a selloff in U.S. equities, according to a source familiar with the matter.

The fund ended March 14 down under 1% in the year, roughly halving a 2% loss it had posted through March 6, with most of the recovery coming from U.S. equities.

The recovery comes as Citadel's founder Ken Griffin told senior management to "play offense" earlier this month amid the selloff, increasing capital allocation to roughly a quarter of the firm's U.S. portfolio managers.

Bloomberg reported earlier on Griffin's message.

Hedge funds unwound positions at the largest amount in years earlier in March after U.S. major stock indexes plummeted over fears tariff policies will drive the world's largest economy into a recession.

The forced unwinding took a toll on hedge funds, including multi-strategy firms like Citadel. JPMorgan said in a recent note that on average multi-strategy hedge funds were down 3.2% this month through March 10, but they gave up part of the losses later and were down 0.7% in the month through March 13.

Citadel declined to comment. (Reporting by Carolina Mandl in New York; Editing by Daniel Wallis)