Hedge Funds Up 12.6%, Emerging Markets Rise 20%

Jan 15 2008 | 12:41pm ET

The average hedge fund returned 12.56% in 2007, according to the Credit Suisse Index Co., making last year one of the most successful in recent memory for the industry.

The Credit Suisse/Tremont Hedge Fund Index added 0.47% in December; for the year, the CS index—which registered one of the highest returns of any broad-market hedge fund index—did more than twice as well as the Standard & Poor’s 500, which finished the year at 5.49% after a 0.69% decline last month.

“Global market indices were relatively flat for the month of December. The U.S. continued to show weakness in many sectors as the credit crunch of 2007 continued to affect financial markets worldwide,” Oliver Schupp, president of the CS Index Co., said. “Overall, this market environment has resulted in eight out of 10 hedge fund sectors ending December on a positive note.”

For that matter, all of the sectors ended the year in the black, led by emerging markets, which rose 20.26% on the year after a 1.32% December return. Global macro funds, which added 1.5% last month, were up 17.36% on the year, and event-driven multi-strategy funds returned 16.82% in 2007 after a 0.5% December rise.

On the lower end of the returns spectrum one finds fixed-income arbitrage, which added just 3.83% on the year (0.21% in December). Other weak strategies in 2007 include convertible arbitrage (up 5.17% in 2007, down 0.4% in December), managed futures (6.01%, up 0.42% in December) and dedicated short bias (6.04%, up 0.06% in December).

Long/short equity funds surged 13.66% last year (0.42% last month), event-driven 13.2% (0.32%), multi-strategy 10.1% (down 0.31%) and equity-market neutral 9.27% (0.48%).


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