Hedge Funds Up 7.32% As Emerging Markets Soar

Jan 11 2013 | 1:17pm ET

Hedge funds returned 7.32% last year, according to eVestment.

The company's Hedge Fund Aggregate rose 1.47% last month as 71% of the funds it tracks turned in a positive December. For the year, 68% of the index's constituents were up, but few managed to top the broader markets in a year that saw the Standard & Poor's 500 Index rise 16%.

India-focused strategies were as likely as any to do so: The average India hedge fund rose an impressive 20.54% (0.97% in Dec.). Other emerging markets strategies also outperformed. Emerging markets funds in general were up an average of 16.84% (4.73% in Dec.), China funds 14.13% (after an amazing 10.44% surge in December) and Brazil funds 12.84% (2.02% in Dec.).

Mortgage strategies were not far behind Indian ones: The average mortgage hedge fund skyrocketed 18.66% last year (0.75% in Dec.). Healthcare hedge funds added 16.58% (0.99% in Dec.), financials funds 15.59% (2/72% in Dec.), volatility and options funds 12.88% (0.78% in Dec.), credit funds 12.15% (1.29% in Dec.) and small- and micro-cap funds 10.22% (2.1% in Dec.).

Only three strategies lost ground last year: technology, which fell 2.14%, all of it in December, when it lost 3.01%; commodities, which fell 2.09% (down 1.24% in Dec.); and managed futures, which fell 0.71% (up 0.46% in Dec.). In addition, energy and equity market neutral funds posted losses in December, falling 0.83% and 0.03%, respectively. Both were up on the year, 0.92% and 3.04%, respectively.

As usual, the largest hedge funds lagged behind their smaller peers. Hedge funds with more than $1 billion in assets returned an average 6.83% in 2012. Mid-sized funds actually did best on the year, up 7.89%, while small funds, those with less than $250 million, rose an average of 7.28%.

eVestment also reported flows into the industry through November. In the first 11 months of last year, hedge funds took in $36.25 billion, increasing the industry's size to $2.58 trillion.  Most of that money went to American or global hedge funds, as investors pulled money from European and Asian strategies. Credit funds also benefitted, taking in $57 billion in new money, while equity strategies saw $20.11 billion in outflows.

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