Compared with last year's numbers—and this year's broader markets—hedge funds had a fairly pedestrian 2010, according to a pair of industry indices.
Hedge Fund Research's HFRI Fund Weighted Composite Index rose 10.42% last year while HedgeFund Intelligence's AR Composite Index added 9.12%. Things looked much worse for both before December when the former rose 3.15% and the latter 3.7%; both still badly trailed the Standard & Poor's 500, which rose more than 6% in December and more than 15% on the year.
Energy and basic materials hedge funds were the best performers tracked by the HFRI indices, rising 15.98% on the year (4.71% in Dec.). Relative value funds did well across the board, rising an average of 11.81% (1.41% in Dec.), paced by fixed-income asset-backed funds (14.32%, 0.98% in Dec.), multi-strategy relative value funds (13.93%, 1.95% in Dec.) and yield alternatives funds (13.32%, 1.87% in Dec.).
Emerging markets funds added an average of 11.8% on the year (2.77% in Dec.), event-driven funds 11.67% (2.68% in Dec.), equity hedge funds 10.4% (3.46% in Dec.) and macro funds 8.41% (3.73% in Dec.). Of all the HRFI strategies and substrategies, only short-bias funds suffered both a losing month and a losing year, declining 8.51% in December to end the year down 21.3%.
Funds of hedge funds added 5.64% on the year, according to HFR.
HFI's index was led by event-driven funds at 13.86% for the full year (3.14% in Dec.). Distressed funds rose 12.08% (1.21% in Dec.), mortgage-backed securities funds 11.9% (1.91% in Dec.), credit funds 11.68% (1.09% in Dec.) and convertible and equity arbitrage funds 10.16% (0.57% in Dec.).