Hedge Funds Climbed 0.2% in January on Best Start for Equities in 18 Years

Date: Wednesday, February 8, 2012
Author: Kelly Bit, Bloomberg

Hedge funds gained 0.2 percent in January as equities around the world had the best start in 18 years after U.S. economic growth showed signs of accelerating and European leaders moved closer to a solution for the region’s debt crisis.

The Bloomberg aggregate hedge fund index increased to 114.63 from 114.36 in December as long-short equity, global macro and multistrategy funds all climbed. Hedge funds fell 4.9 percent last year as concerns grew that Europe’s debt crisis couldn’t be contained and stocks experienced sharp price swings.

“We’re extremely pleased with how the portfolio’s been performing in 2012 to date,” said John Bailey, founder and chief executive officer of Spruce Private Investors LLC, whose Stamford, Connecticut-based firm advises investors holding about $3 billion of assets. “Investors will be looking for some measure of value added in hedge funds in 2012.”

The MSCI All-Country World Index rose 5.8 percent including dividends in January, the most since it climbed 6.5 percent at the start of 1994, according to data compiled by Bloomberg. American unemployment and Chinese inflation declined during the month, German investor confidence jumped and the U.S. Federal Reserve pledged to keep interest rates near zero percent through 2014.

The Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products added 2.2 percent, the most since October. Global bonds climbed 0.6 percent and the U.S. dollar fell 1.1 percent. Earnings beat projections at 67 percent of the 198 companies in the S&P 500 that reported quarterly results since Jan. 9, according to data compiled by Bloomberg. The U.S economy is forecast to grow 2.3 percent in 2012, according to the median projection in a survey of economists, up from the estimate of 2.1 percent in December.

Paulson Snaps Losses

John Paulson, the billionaire money manager who had his worst year on record in 2011, posted gains in all of his funds, according to an investor update obtained by Bloomberg News. Paulson & Co., which is based in New York and manages about $24 billion, rebounded last month as stocks rallied and gold surged 11 percent. It was the biggest January increase for gold since 1983, as investors speculated that low interest rates in developed nations such as the U.S. and Canada will spur global growth. Paulson investors can choose between dollar- and gold- denominated versions for most of the firm’s funds.

Multistrategy hedge funds gained 0.9 percent in January. Long-short equity funds, whose managers can bet on rising and falling stocks, advanced 1.6 percent last month.

Macro funds, which bet on global economic trends, increased 1.1 percent last month. Autonomy Americas LLC’s Global Macro Fund was up an estimated 4.7 percent in January after returning 14 percent in 2011, according to an e-mail sent to investors, a copy of which was obtained by Bloomberg News. The $2 billion fund is run by Robert Gibbins.

Money Sidelined

The main Bloomberg hedge-fund index is weighted by market capitalization and tracks 2,825 funds, 1,459 of which have reported returns for January. The index is down 12 percent from its July 2007 peak.

Investors pulled $127 million from hedge funds in the fourth quarter amid wide swings in global markets, leaving the industry with $2.01 trillion in assets, according to Chicago- based Hedge Fund Research Inc.

“There’s a lot of money on the sidelines that’s waiting to get through the uncertainty,” said Greg Anderson, chief investment officer of Denver- and Minneapolis-based Princeton Fund Advisors LLC, which, along with its affiliates, advises clients on $1.6 billion in assets. “Once you see that uncertainty resolve, you’ll see a much better marketplace, especially for alternatives.”

To contact the reporter on this story: Kelly Bit in New York at kbit@bloomberg.net