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Last updated 17 hours ago
Jan 7 2011 | 9:14am ET
Hedge funds ended 2010 with a 1.7% gain as stocks surged into 2011.
The average hedge fund added 7% last year, according to the Bloomberg Aggregate Hedge Fund Index. That put the index at its highest level in more than two years—since August 2008, to be precise, just before hedge funds began their serious financial crisis swoon—but it badly trailed the broader markets, finishing the year with less than half the return of the Standard & Poor's 500 Index, which added more than 15% last year.
Despite a 6.7% jump for the S&P500, short-sellers were actually the best-performing strategy in December, adding 3.1% (7.5% year-to-date). By contrast, mortgage arbitrage funds had the slowest month but the best year, returning 24% in 2010 but just 0.1% in December.
Long/short equity funds added an average of 2% in December (9.3% YTD), while macro funds returned 1.2% (2.2% YTD). Multi-strategy hedge funds returned an average of 1.4% last month, but finished the year in the red, down 2.9%.
Statistical arbitrage funds suffered the worst December of all, dropping 4.3%. But the decline wasn't enough to send it to a losing 2010; the strategy ended last year up 0.4%.