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Barclay Hedge Fund Index down -0.38% in December (-5.37% in 2011)

Friday, January 13, 2012
Opalesque Industry Update - Hedge funds lost 0.38% in December, according to the Barclay Hedge Fund Index compiled by BarclayHedge. The Index was down 5.37% at the end of 2011.

"Equity markets started the month with a sell-off, and then went on to rally going into Christmas," says Sol Waksman, founder and president of BarclayHedge. "Unfortunately, markets that see-saw can be quite difficult for managers to navigate successfully."

"Dramatic volatility in global equity markets created a significant challenge for fund managers throughout 2011, evidenced by the fact that 60 percent of funds reported a loss for the year," says Waksman.

"This lead to an underperformance by hedge funds of 7.39 percent when compared to the S&P 500, the worst since the 10.69 percent gap in performance back in 2003."

After overall gains in the first four months of the year, it was mostly downhill for hedge funds for the remainder of 2011.

The Barclay Emerging Markets Index lost 13.02% in 2011, Equity Long Bias was down 9.38%, Pacific Rim Equities gave up 7.95%, European Equities were down 6.44%, and the Distressed Securities Index lost 6.32%.

"Although Emerging Markets was the poorest performer of the sectors that we track, investors continue to be attracted to the strategy, as evidenced by inflows of $7.6 billion in the past 12 months," says Waksman.

Equity Short Bias was the strongest performing hedge fund strategy in 2011, with an overall return of 7.70%. Fixed Income Arbitrage gained 4.54% for the year, and Merger Arbitrage was up 3.99%.

"Fixed Income funds saw investor inflows of $18 billion in the past 12 months even as prognosticators fretted that the 3-year rally was starting to appear a bit long in the tooth,"says Waksman.

The Barclay Fund of Funds Index was down 0.49% in December, and lost 6.14% in 2011. Full performance table:

(press release)
PD

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