Last year was a difficult one for the hedge fund industry, with below-average returns, fewer launches, more liquidations and a barren capital-raising landscape.
The average hedge fund ended the year up only 5.63%, according to the Eurekahedge Hedge Fund Index, after a 1% jump in December. The Standard & Poor's 500 Index rose 16% on the year.
Still, hedge funds' performance accounted for most of the industry's growth in 2012—hedge fund managed $75 billion more at its end than at its beginning, and now have $1.78 trillion in total assets under management. But that was due to a pathetic fundraising environment: Net flows into the industry were just $19 billion, less than half 2011's figure. And all of it went to North American hedge funds; European, Asian and Latin American hedge funds all suffered net outflows regionally, according to Eurekahedge. Despite that, Latin America and Asia ex-Japan funds performed best, rising 11.2% and 10.5%, respectively.
More hedge funds debuted in 2012 than died; but both figures are on the wrong track. The 959 launches were fewer than in 2011, and the 860 closures were the most since the financial crisis.
Among strategies, distressed debt, fixed-income and relative-value did best, all rising by double-digits.