Hedge funds posted their strongest start to a calendar year since 2000, with significant contributions from strategy areas which underperformed in 2011, according to data released today by HFR.
The HFRI Fund Weighted Composite Index gained 2.14 per cent in February, bringing performance through the first two months of 2012 to nearly five per cent. The recent gains have nearly recovered the -5.26 per cent decline from 2011, a year in which total hedge fund industry capital rose by 3 per cent to $2.02 Trillion.
Equity Hedge funds have had the most significant contribution to HFRI performance in 2012, with the HFRI Equity Hedge Index gaining 6.9 per cent through February . Gains have been broad-based across Equity Hedge sub-strategies, including Fundamental Growth, Value and Energy, with the only Short Bias funds detracting from gains.
Positive performance in 2012 has been broad-based across all main strategies, with Event Driven, Relative Value Arbitrage and Macro also posting gains in early 2012. Equity, M&A and credit-sensitive strategies have posted strong gains, with the HFRI Event Driven Index gaining 1.9 per cent in February (+4.6 per cent YTD) with significant positive contributions from Activist and Special Situations hedge fund strategies. Similarly, fixed income-based Relative Value Arbitrage funds gained 1.7 per cent in February (+3.6 per cent YTD) as spread tightening and strong liquidity contributed to Arbitrage gains. Macro funds have also posted gains despite the volatile commodity and trend following environment. The HFRI Macro Index, which gained 1.2 per cent in February, has gained 2.4 per cent YTD despite declines across most commodity focused hedge funds. Systematic, trend following Macro funds gained 1.1 per cent in February and have gained 1.5 per cent for 2012.
Hedge funds investing in Emerging Markets have also posted strong gains, with the HFRI Emerging Markets (Total) Index gaining 4.3 per cent in February and 9.3 per cent through the first two months of 2012. While performance has been strong across all Emerging Markets regions, the strongest gains have been in funds investing in Russia and Eastern Europe, gaining 12.7 per cent through early 2012.
“Hedge fund performance through early 2012 has benefitted from improvement or total reversal of the trends, sentiment and volatility which contributed to the challenging environment in 2011,” says Kenneth J Heinz (pictured), president of HFR. “While many of the macroeconomic risks remain salient in the current environment, fundamental and convergence oriented themes and positions have gained traction on improvements and optimism across US and European economic outlooks. While equity market volatility may rise from early 2012 subdued levels, hedge funds are well positioned in the current environment to opportunistically adjust exposures and generate gains across multiple asset classes globally in 2012.”