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From Kirsten Bischoff, Opalesque New York:

The past two years marked a turbulent time for the hedge fund industry. Negative performance in 2008 left many investors questioning the "absolute returns" hedge funds touted during the years of economic growth preceding the financial crisis. Assets that weren't gated by managers swept out of the industry and large numbers of hedge funds liquidated completely.

Then, record-breaking gains in 2009 earned back almost all of the performance losses of the year before and managers were able to make the case that two-year performance showed capital protection on the downside of a severe market event, as well as participation in the subsequent market recovery.

Now, as managers seek to woo back investors they have had to address and improve administrative issues such as (a lack of) transparency and areas of operational risk. As hedge funds emerge a leaner and meaner force in the financial world embarking on 2010 the state of the industry is strong.

Overall performance in 2009 With 83% of all funds posting positive performance in 2009 (all performance numbers in this article are per 2009 year end reporting by Credit Suisse Tremont HedgeIndex) hedge funds recovered 76.7% of losses and 28% of managers enter 2010 at peak performance (above previous high water marks).......................

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