Hedge funds ended 2012 on a positive note, but one drowned out by a discordant and disappointing year.
The average hedge fund returned just 3.51% last year, and a good chunk of that came in December: The HFRX Global Hedge Fund Index rose 0.92% on the month, according to Hedge Fund Research. The Standard & Poor's 500 Index returned 16% last year.
All of the HFRX strategy and substrategy indices—save one—were up in December, and only three were down on the year. Last year's best performance came from emerging markets funds, which returned 8.67% (1.79% in Dec.). Credit funds rose 7.65% (1.47% in Dec.), convertible arbitrage funds 7.21% (1.08% in Dec.), fundamental growth funds 6.3% (1.61% in Dec.) and event-driven funds 5.96% (1.29% in Dec.).
Equity hedge funds rose 4.81% in 2012 (0.44% in Dec.) and relative-value arbitrage funds 3.62% (1.28% in Dec.).
Last year's losers were systematic diversified commodity trading advisers, which fell 7.4% (up 0.85% in Dec.); equity market neutral funds, down 4.66% (up 0.1% in Dec.); and macro funds and CTAs, down 1% (up 0.65% in Dec.). The only strategy to lose ground last month was master-limited partnerships, which fell 1.08% to cut its 2012 gain to 4.12%.