The Eurekahedge Hedge Fund Index was up one per cent in December, bringing the yearly number to 5.63 per cent.
The MSCI World Index returned 2.28 per cent in December and was up 13.75 per cent for year 2012.
Hedge funds started the year on a strong positive note, gaining 4.16 per cent in the first two months before posting losses for four consecutive months. Performance rebounded in the second half of the year, with hedge funds gaining 3.92 per cent, as global markets rallied amid positive announcements by governments around the world.
Total hedge fund assets grew by USD75bn taking the size of the overall industry to USD1.78trn.
Hedge fund launch activity slowed down in 2012 with 959 hedge funds launching in the year, while fund closure rate was the highest since the financial crisis with 860 funds closing shop during 2012.
Capital raising remained challenging with net asset flows standing at USD19bn for the year.
Hedge funds focused on emerging markets provided the best returns for 2012, with Asia ex-Japan funds up 10.5 per cent over the year while Latin American funds were up 11.2 per cent.
The Mizuho-Eurekahedge Index, an asset-weighted index, finished the year with gains of nearly six per cent.
Distressed debt fund delivered the strongest performance among strategies, gaining 12.2 per cent in 2012, while fixed income and relative value hedge funds also finished the year with double digit growth
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