Three Indices Show Middling February Hedge Fund Returns

Mar 9 2011 | 1:27pm ET

It was a pretty pedestrian February for hedge funds, according to a trio of industry indices.

The average hedge fund rose 1.25%, 1.21% or 0.73%, depending on whether you prefer the Greenwich Global Hedge Fund Index, the HFRI Fund Weighted Composite Index or the HFRX Global Hedge Fund Index. By comparison, the Standard & Poor's 500 Index rose more than 3% on the month.

"Hedge funds were led by directional strategies in February, given the rise in equities and surging commodity prices," Clint Binkley, senior vice president at Greenwich Alternative Investments, said. "Tension in the Middle East is being overshadowed by strong corporate earnings and continued economic recovery, which is reflected in the results of funds investing in developed markets."

The Greenwich index was led by distressed securities funds, which rose an average of 2.08% on the month (4.16% year-to-date). Among its strategy groups, directional trading did best, adding 1.61% (0.79% YTD), followed by long/short equity, up 1.19% (1.5% YTD) and market-neutral, up 0.8% (1.01% YTD). Special strategies rose 0.79% on the month (1.53% YTD).

Regionally, North American funds were king, adding 2.53% in February (3.58% YTD), while emerging markets funds shed 0.55% on the month (down 1.06% YTD).

Among strategies tracked by Hedge Fund Research's HFRI indices, energy and basic materials funds had the best month, up 4.31% (5.18% YTD), followed by private issue and Regulation D funds at 3.75% (7.49% YTD) and Russia and Eastern Europe funds at 3.26% (9.9% YTD).

Event-driven funds added an average of 1.45% (3.26% YTD), macro funds 1.29% (0.63% YTD), equity hedge funds 1.21% (1.68% YTD), relative value funds 0.81% (2.01% YTD) and emerging markets funds 0.25% (0.32% YTD). Funds of hedge funds rose 0.64% (0.78% YTD).

HFR's other family of indices, the HFRX line, had the distinction of having none of its strategy-specific benchmarks in the red last month. But none of its indices enjoyed the highs that the best strategies tracked by the other two had, either. Special situations funds led the way with a 1.83% return (2.83% YTD). Other top HFRX performers were convertible arbitrage (1.72% in Feb., 3.39% YTD), equity market neutral (1.6%, 1.24% YTD), North America (1.46%, 2.98% YTD), event-driven (1.35%, 2.23% YTD), multi-region (1.24%, 2.21% YTD) and fundamental growth (1.08%, 1.33% YTD).

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