Hedge Funds End 2012 Up 5.63%

Jan 15 2013 | 2:43pm ET

The year 2012 was far from a banner year for hedge funds, according to the latest Hedge Fund Monitor from Bank of America Merrill Lynch.

The global diversified hedge fund index was up 5.63% in 2012, compared to the 16% return of the S&P 500.

The best-performing strategies last year were distressed credit and event-driven, up 9.61% and 9.10%, respectively. The biggest losers were short-biased funds—down 14.31%. Managed futures strategies also ended the year in the red, losing 3.13%.

According to BofAML analyst Mary Ann Bartels, market neutral funds bought market exposure to 5% from 3% net long; equity long/short funds “aggressively” bought market exposure to 23% from 19% net long; and macros bought the NASDAQ 100, commodities and 10-year Treasuries; partially covered their shorts in emerging markets and EAFE exposures; and sold the S&P 500 and U.S. dollar futures.

Commodity Futures Trading Commission data shows large speculators sold the S&P 500 and Russell 2000 futures while buying the NASDAQ 100.

Agriculture speculators sold soybeans and corn, partially covering wheat while metals speculators bought copper and platinum while selling gold, silver and palladium. Energy speculators bought crude, heating oil and gasoline and partially covered natural gas.

Forex speculators partially covered the yen, bought the U.S. dollar and sold the euro as interest rate specs sold Treasuries across the board.


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