Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index will finish up 0.39 per cent in December 2009, based on 62 per cent of assets reporting.
Top performing sectors in December included event driven (up 1.91 per cent), long/short equity (2.01 per cent), emerging markets (2.18 per cent) and convertible arbitrage (2.08 per cent).
Event driven managers capitalised on their credit books as high yield and leveraged loan markets spreads tightened. Managers also seized opportunities in select idiosyncratic distressed situations.
Long/short equity and emerging markets experienced positive performance in the final month of the year with performance largely propelled by rallies in Japanese and certain European equity markets. Following early gains, many managers took risk off the books as markets slowed down in the second half of the month.
A correction in gold and other precious metals resulted in losses in the global macro (-2.07 per cent) and managed futures (-4.59 per cent) sectors. Many macro managers were also adversely affected by the reversal in the US Dollar. Quantitative funds experienced some of the steepest losses due to high levels of risk while discretionary managers had better performance as many pared back risk towards the end of the year.
Convertible arbitrage experienced its 12th consecutive month of gains to end the year as best performer among hedge fund strategies as the US convertible bond market had a record return of 49 per cent in 2009. New issuance was light aside from a USD3.5bn issue from Citibank.
