Morningstar: Hedge Funds Add 2.77% In March, $2.6B In Feb.

Apr 26 2010 | 3:41pm ET

It was a relatively slow month for the hedge fund industry, but that may be changing, according to Morningstar.

The Chicago-based research giant said its Morningstar 1000 Hedge Fund Index returned 2.77% last month and 1.63% in the first quarter. The firm also said that hedge funds enjoyed some $2.59 billion in inflows in February, cutting the industry’s year-to-date outflow to just over $1 billion.

“Hedge funds remain cautious, but they are peeking their heads out at the stock market rally,” John Rekenthaler, vice president of research, said. “They are assuming greater market risk while equity markets rebound.”

All but one hedge fund strategy tracked by Morningstar managed a positive return during that market rebound last month. Distressed securities funds did best, adding 5.81%% (7.42% year-to-date), followed by U.S. small-cap funds (4.53%, 2.49% YTD), emerging market equity funds (4.3% in March, 1.75% YTD) and global trend funds (4.08%, 0.04% YTD).

Only short equity funds lost ground in March, falling 0.48% (down 2.36% YTD). Funds of hedge funds rose 1.6% in March and are essentially flat—up 0.05%—on the year.


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