HFR: Hedge Funds Add 2.6% In January

Feb 7 2012 | 2:52pm ET

If hedge funds made a New Year’s resolution to perform better in 2012, they’re sticking to it so far: HFR reports its HFRI Fund Weighted Composite Index gaining 2.63% in January.

That’s the index’s second-best performance since December 2010, according to the hedge fund data agency.

Equity hedge strategies performed best in January, gaining 3.84%, led by fundamental growth, value and energy/basic materials sub-strategies. Event driven and relative value arbitrage strategies added 2.4% and 2.3%, respectively, thanks to special situations and activist funds in the event driven category and yield alternative and convertible arbitrage exposures in the relative value category.

Macro strategies gained 1.1% in January, helped by discretionary strategies, and complemented by gains in quantitative, trend-following strategies. Both currency- and commodity-focused funds posted January gains despite underlying asset volatility; the HFRI Macro: Systematic Diversified Index posted a gain of 0.32%.

The only negative performers were equity hedge: short bias funds, which fell 8.3% in January, after adding 0.4% for all of 2011.
 
Emerging markets funds, which trailed the pack in 2011, turned the tables in January 2012, adding 5.3%—they’re strongest showing since May 2009, when they returned 9.6%. Hedge funds focusing on Russia/Eastern Europe and Latin America exposures led EM performance, gaining 9.2% and 6.9%, respectively.

“January performance for hedge funds was driven by a number of positive factors, with these generally constituting a reversal of the cyclically high levels of risk aversion which influenced not only fundamental asset price convergence, but also capital allocations by leading investors throughout 2011,” said Kenneth J. Heinz, president of HFR. “While equity markets are off to a strong start, investors should remain cognizant of the dynamic risk environment across currencies, commodities, strategic acquisitions, fixed income and emerging markets which will continue to create opportunities both long and short throughout 2012.”


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