Hedge Funds Up To Open '14 After Underperforming In '13

Jan 21 2014 | 10:53am ET

Hedge funds did almost as well in the first two weeks of January as they did all of last month—one which capped an extremely disappointing year for the industry.

The average hedge fund is up 0.45% through Jan. 15, according to the HFRX Global Hedge Fund Index. The same benchmark returned 0.56% in December and 6.72% in 2013, a far cry from the 30% return enjoyed by the Standard & Poor's 500 Index.

Among major strategies, event-driven posted the biggest gains last year, up 13.87% (0.28% in December). Equity hedge funds added 11.14% (1.25%) and relative-valye arbitrage funds 2.96% (0.6%), while macro funds and commodity trading advisers lost 0.05% on the year (down 1.79% in December).

Master-limited partnerships enjoyed the best year overall, rising 26.35% (3.53% in December), followed by energy infrastructure funds at 23.8% (1.09%), technology and healthcare funds at 20.88% (2.11%), activist funds at 19.32% (1.71%), special situations funds at 18.17% (0.38%), multi-strategy funds at 16.48% (1.4%), fundamental value funds at 16.05% (1.39%), asset-backed funds at 14.6% (1.21%), credit arbitrage funds at 12.61% (1.06%), quantitative directional funds at 11.03% (1.68%) and convertible arbitrage funds at 10.42% (1.11%). Credit funds rose 6.87% on the year (0.45% in December), merger arbitrage funds 4.03% (0.45%) and equity market neutral funds 1.72% (0.17%).

Regionally, Japan-focused hedge funds were the place to be, soaring by 32.25% on the year (2.28% in December). Middle East and North Africa funds rose 20.31% (0.74%), China funds 19.08% (1.4%), Asia funds 14.52% (1.55%), Western and pan-European funds 13.63% (1.39%) and North America funds 12.54% (0.97%). Outside of China, BRIC-focused funds did very badly, with India funds dropped 10.48% (up 2.38% in December), Brazil funds 10.42% (down 2.1%) and Russian funds down 5.22% (up 1.96%).

They weren't the only losing bet in 2013: Metals funds were crushed on the year, falling 32.86% (up 2.06% in December). Not even short-bias funds, battered by the soaring stock market, did as badly, falling only 10.29% (down 0.49%). Commodity funds and systematic diversified CTAs posted most modest losses in 2013, falling 1.65% (up 0.89%) and 1.30% (up 0.55%), respectively.

In the early going, 2014 hasn't been any kinder to those strategies. Systematic CTAs are down 0.63% through Jan. 15 and macro funds and CTAs overall are down 0.13%. But last year's top performer, MLPs, are doing even worse, down 0.8%, with merger arbitrage funds shedding 0.23%.

Early-January winners are led by fundamental growth funds, up 2.28%. Distressed restructuring funds are up 0.94%, multi-region funds 0.89%, credit funds 0.83%, event-driven funds 0.75%, equity hedge funds 0.73% and special situations funds 0.73%.


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