Hedge funds have posted gains in the first two months of the new year, according to one prominent industry index.
The Hennessee Hedge Fund Index added 0.23% last month and is up 3.01% on the year. Both figures badly lag the broader markets, with the Standard & Poor's 500 Index adding 1.11% on the month and 6.2% on the year. But that underperformance could actually be a boon to hedge funds, Hennessee Group's Charles Gradante said.
"With equity markets near all-time highs, we are seeing more allocations into hedge funds. Many individuals feel that the equity and credit market upside is somewhat limited at this point and there are several risks that could cause markets to fall."
While the average hedge fund gained ground in February, the month was a mixed bag for the industry. While arbitrage and event-driven funds returned an average 0.46% (2.07% year-to-date) for the month, individual strategies ranged from a 1.07% jump for distressed funds (2.29% YTD) to a 0.6% return for merger arbitrage funds (1.24% YTD) and a 0.18% drop for convertible arbitrage funds (up 1.16% YTD).
Other winners included long/short equity funds, up 0.38% in February (3.43% YTD). Other losers included macro funds, which lost an average 1.63% (up 1.95% YTD), and emerging markets funds, which lost 0.41% (up 2.51% YTD).