Hedge funds had a big December—the second-best month of the year—but the broader markets have a better month and, in the end, a better year.
The Hennessee Hedge Fund Index rose 3.04% last month, ending the year up 10.05%. But the Standard & Poor’s 500 Index soared more than 6% in December and more than 15% on the year.
Still, it was a good year for hedge funds: Only one strategy wilted in the face of the market rally (short-bias, which lost 13.18% on the year after shedding another 4.6% in December). Arbitrage and event-driven funds returned an average of 12.35% in 2010, while global/macro funds added 9.32% and long/short equity funds added 9.11%.
Among sub-strategies, event-driven funds took pride of place in 2010, rising an average of 16.2% (4.39% in December). Distressed funds followed at 14.76% (3.14% in Dec.) with emerging markets funds at 13.65% (2.83% in Dec.)
Latin America funds added 13.35% (1.04% in Dec.), financials funds 13.3% (5.94% in Dec.), technology funds 12.68% (2.85% in Dec.), fixed-income funds 12.59% (2.21% in Dec.), international funds 12.08% (2.64% in Dec.), high-yield funds 12.02% (1.45% in Dec.) and multiple arbitrage funds 11.41% (2.4% in Dec.). Value funds returned 11.37% on the year (2.95% in Dec.), growth funds 10.94% (4.26% in Dec.), convertible arbitrage funds 10.44% (1.36% in Dec.), telecomm and media funds 8.33% (0.53% in Dec.), macro funds 7.96% (3.27% in Dec.), merger arbitrage 7.17% (2.55% in Dec.) and Asia-Pacific funds 6.16% (2.08% in Dec.).
Private investment in public equities and private financing funds were up 6.05% last year (1.28% in Dec.), opportunistic funds 5.61% (3% in Dec.), healthcare and biotechnology 5.07% (4.57% in Dec.), market neutral funds 5.06% (1% in Dec.) and Europe funds 4.24% (3.22% in Dec.).