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Alternative Market Briefing

Early look at January shows L/S and event driven funds protected capital as equity markets slid

Tuesday, February 02, 2010

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From the Opalesque team:

Hedge fund pulled significant risk off the table at the end of 2009, wary about the possibility of an early 2010 correction. An early look at the January performance numbers for the Dow Jones Hedge Fund Indexes (DJHFI) show that even after the record gains of last year, hedge funds remain focused on capital protection during down markets.

DJHFI reported an estimate gain of +0.22% for long/short funds and a +0.72% gain for event driven funds. The DJHF Arbitrage Index ended the month essentially flat at -0.03%.

US equity markets entered 2010 with signs of strength, but by the end of January had fallen -3% (DJI and S&P 500), showing signs of the possible correction hedge fund managers were wary of as 2009 came to a close.

Capital protection may have limited hedge fund gains at the end of the year, but investors seem to place just as much importance on capital protection as they do on performance gains. Eurekahedge reported that in a dramatic turnaround from just a year prior, investors poured over $4.6bn into hedge funds during January. Strong performance against shaky financial markets will likely mean the continuation of net asset inflows for hedge funds.

Capital protection may have limited hedge fund gains at the end of the year, but investors seem to place just as much importance on capital protection as they do on performance gains.  Eurekahedge reported that in a dramatic turnaround from just a year prior, investors p......................

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