Hedge funds inched up in January as the broader markets continued their strong run.
The Hennessee Hedge Fund Index rose 0.65% in the first month of the year. The benchmark added 10.05% last year.
By contrast, the Standard & Poor's 500 Index rose 2.26% last month and more than 15% last year.
Arbitrage and event-driven funds did best, adding 1.82%. Long/short equity funds rose 0.39%, while global and macro funds dropped 0.22%.
Among specific strategies in January, private investment in public equities and private financing funds led the way with a 3.01% return, followed by fixed-income funds at 2.57%, high-yield funds at 2.43%, distressed funds at 2.13% and convertible arbitrage funds at 2.13%.
"Managers are encouraged by declining correlations among stocks and sectors," managing principal Lee Hennessee said. "As companies reported earnings in recent weeks, stocks started to respond more to fundamentals. As a result, managers are finding attractive opportunities on both the long and short sides of the portfolio and are increasing gross exposure levels."
A handful of hedge fund strategies lost ground last month, including healthcare and biotechnology funds, down 1.53%, short-biased funds, down 1.34%, macro funds, down 0.95%, Latin America funds, down 0.2%, Europe funds, down 0.19%, and emerging markets funds, down 0.14%.