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The hedge fund industry (as measured by the Credit Suisse/Tremont Hedge Fund Index, the “Broad Index”) continued its positive performance into 2010, returning 3.1% in the first quarter and outperforming equity and bond indices on a risk-adjusted basis. The report examines the current return drivers in the industry and explores some of the noteworthy trends that have characterized markets in recent months.

Some key conclusions from the report include:

• As of March 31, 2010, eight out of the ten sectors in the Broad Index posted positive returns in the first quarter, with 69% of all funds posting positive performance;
• The beta of hedge funds to global equity markets is now at its lowest level since 2004. In turn, manager returns currently appear to be less driven by systematic or beta risks than they have been in the last five years;
• The Event Driven sector had the strongest performance in the Broad Index, up 4.8%, and the consensus is that credit opportunities could continue to generate alpha opportunities in the space;
• Overall, hedge funds have recovered 92% of all 2008 losses, while certain sectors, including Convertible Arbitrage and Event Driven, have now fully recovered their 2008 losses;
• The hedge fund industry experienced estimated net inflows of approximately $2 billion in the first quarter;
• Including performance gains, estimated industry assets under management currently remain at $1.5 trillion (as of March 31, 2010).

See today’s Opalesque Exclusive: Hedge fund industry returns show lowest beta level since 2004 – Credit Suisse/Tremont here.

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