Barclay Hedge Fund Index gains 2.88% in December

Date: Thursday, January 13, 2011
Author: Wendy Chothia, HedgeWeek

Hedge funds gained 2.88 per cent in December and are up 10.86 per cent in 2010 according to the Barclay Hedge Fund Index compiled by BarclayHedge.

“After two years of strong gains, close to 64 per cent of the hedge funds that report data to us have now recovered from losses in 2008,” says Sol Waksman, founder and president of BarclayHedge. "Although hedge funds under performed US equities in 2010, +15.07 per cent for the S&P 500 versus +10.95 per cent for the Barclay Hedge Fund Index, the S&P 500 still remains 8.3 per cent below its year-end 2007 close, while the hedge fund index is up 7.59 per cent."

Overall, 17 of Barclay’s 18 hedge fund indices had a positive return in December. The Barclay Equity Long Bias Index was up 5.41%, Healthcare & Biotechnology gained 3.37%, Equity Long/Short rose 3.07%, Pacific Rim Equities gained 2.62%, and the Event Driven Index was up 2.43%.

“Equity markets rallied as bullish sentiment returned in December, with investors focused on upward revisions of GDP growth estimates for 2011,” says Waksman.
The same 17 indices all had gains at the end of 2010. Equity Long Bias was up 14.33% for the year, Distressed Securities were up 12.57%, Technology gained 12.41%, Convertible Arbitrage rose 12.23%, and Emerging Markets were up 12.05%.

"Global rallies in equity and fixed income markets in 2010 and compression of credit spreads were the main drivers of return across all hedge fund strategies other than short equities," says Waksman.

The only losing strategy in December was Equity Short Bias, which fell 6.15%. Following a record gain of 40.91% in 2008 when equity markets plummeted, Equity Short Bias lost 18.80% in 2009, and another 14.67% in 2010.

The Barclay Fund of Funds Index gained 1.94% in December, and is up 4.73% for the year.