Kenneth J. Heinz Opalesque Industry Update - Hedge funds concluded a challenging 2011 with a decline in December, as the HFRX Global Hedge Fund Index declined by -0.42%, bringing full year 2011 performance to -8.87%. The decline marks only the second calendar year decline since HFRX index performance inception in 1998, also corresponding to the second decline in the last four years. The HFRX Absolute Return Index, which contains constituents with characteristically lower levels of directional exposure, posted a narrow decline of -0.13% for December and -3.72% for 2011.
The HFRX Relative Value Arbitrage Index ended 2011 with a gain of +0.11% in December with positive contributions from Convertible Arbitrage (+0.32%) and Yield Alternatives: Energy Infrastructure strategies. Fixed Income-based Multi-Strategy, Asset Backed and Energy Infrastructure sub-strategies each posted gains in 2011, with the HFRX RV: Multi Strategy Index gaining +0.05% for 2011.
HFRX Event Driven and Macro strategies posted declines of -0.56% and -0.28% for December, concluding 2011 with declines of -4.90% and -4.88%, respectively. Both Macro Systematic Diversified and Merger Arbitrage strategies had positive contribution to Index performance for December, with gains of +0.82% and +0.07%, respectively.
Equity Hedge strategies were the weakest area of performance for both December, with the HFRX Equity Hedge Index posting a decline of -0.85% which was only partially offset by Market Neutral strategies which gained +0.18% for the month. Short Bias and Technology/Healthcare also had positive contributions to Equity Hedge for 2011.
"Volatile and unpredictable market dynamics throughout the year created a challenging environment for hedge funds in 2011, with aggregate losses across currency, commodity, Emerging Markets and equity strategies related to the European currency and sovereign debt crisis," stated Kenneth J. Heinz, President of HFR. "Risk-off trades dominated 2011, creating challenges for convergence oriented funds, while contributing to gains across fixed income and certain low net exposure hedged strategies. After a challenging 3Q, hedge funds adapted strategies to this continuing macro-volatility dynamic in 4Q in anticipation of this environment persisting into early 2012." Full press release: a href=http://www.hedgefundresearch.com/hfrx-monthend_daily.htm target=_blank>Source