Hedge Funds Add Almost 13% In 2013

Jan 14 2014 | 12:22pm ET

Barring a miraculous 20%-plus average return in December, hedge funds were going to end 2013 far behind the broader markets. And so they have.

The average hedge fund returned 12.86% last year, according to the Hennessee Hedge Fund Index. The Standard & Poor's 500 Index, by contrast, was up about 30%.

Just one strategy tracked by the Hennessee Group managed to match or exceed that lofty return, as healthcare and biotechnology funds soared 34.57% in 2013. The strategy was also the best in December, adding 3.06%. The overall Hennessee index rose 1.52% last month.

Long/short equity funds rose an average of 19.28% last year (2% in December) as stocks rallied. Arbitrage and event-driven funds added 10.28% (1.17%) and global and macro funds 6.15% (1.14%).

Given stocks' fantastic year, equity strategies were tops in 2013. Financial equities funds returned an average of 23.16% last year (3.03%), value funds 21.1% (1.64%), growth funds 18.25% (1.62%) and technology funds 17.58% (2.46%).

Europe funds added 19% (2.37%), distressed funds 16.16% (1.96%), opportunistic funds 15.85% (1.37%), event-driven funds 14.95% (1.67%) and multiple arbitrage funds 11.23% (1.57%). Asia-Pacific funds rose 9.92% (0.93%), international funds 8.74% (1.5%), high-yield funds 7.86% (0.72%), merger arbitrage funds 7.74% (0.97%), market-neutral funds 7.42% (1.5%), emerging markets funds 7.16% (0.55%), convertible arbitrage funds 6.68% (down 0.07%) and fixed-income funds 4.26% (0.14%).

Three strategies suffered losses last year: Short-biased funds, which plummeted 28.33% (down 2.46% in December, the strategy enjoyed only two positive months in 2013); Latin America funds, which lost 2.64% (down 1.48% in December); and macro funds, which ended the year down 0.77% after a 1.21% jump last month.


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Editor's Note