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Alternative Market Briefing

2012 another disappointing year for hedge funds - BAML

Wednesday, January 16, 2013

Bailey McCann, Opalesque New York: 2012 ranks as the fifth worst year in 18 years for hedge fund performance on the Bank of America Merrill Lynch Global Diversified Hedge Fund Index, according to new data from the firm. Global Diversified HF index was up 5.63% in 2012, compared to an average annual return of 9.20% since 1995. The S&P 500 returned a total of 16.0% in 2012, outperforming the Global Diversified HF index by 10.37%.

For the last 18 years, hedge funds in the index on average have lagged the S&P by 1.8%. Whereas, the HFRI equity hedge (total) index, which includes a more concentrated blend of equity strategies, was up 7.39% in 2012 and leads the S&P 500 by an average of 1.2% since 1995.

For 2012 in total, Distressed Credit and Event Driven performed the best, up 9.61% and 9.10%, respectively. Short Biased and Managed Futures performed the worst and was down 14.31% and 3.13%. Toward the end of the year Market Neutral funds increased market exposure to 5% from 3% net long. Equity Long/Short aggressively bought market exposure to 23% from 19% net long, yet still below the 35-40% benchmark.

The COT Eurodollar benchmark remains bearish coming into the beginning of 2013. According to the report, " the Eurodollar indicator peaked in late November last year indicating a risk that the S&......................

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