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Hedge Funds posted their strongest gains since 2010, with the HFRX Global Hedge Fund Index gaining +1.72% for the month, while the HFRX Market Directional Index gained +1.88%.

The HFRX Event Driven Index posted a gain of +2.80%, its strongest performance since May '07, with positive contributions across all Event Driven strategies, concentrated in Distressed and Activist strategies. Corporate credit and M&A deal spreads tightened, despite the termination of the NYSE/Deutsche Borse transaction. The HFRX Distressed Index posted a gain of +3.10%, its strongest performance in 22 months, while the HFRX Special Situations Index posted a gain of +2.18% for the month. M&A activity continued with deals in the pharmaceutical and technology sectors, with the HFRX Merger Arbitrage Index gaining +0.51%.

The HFRX Equity Hedge Index gained +2.07%, the largest gain since December 2010, with gains concentrated in Energy/Basic Material, Financials and Technology/Healthcare sectors. Managers benefitted from improving conditions and reduced volatility in the equity markets; Fundamental Growth strategies posted gains from exposure to US small cap, Latin America and Asia ex-China, while Fundamental Value managers benefited from European positioning while Japanese exposure detracted. The HFRX Fundamental Growth Index and the HFRX Fundamental Value Index posted a gain of +2.11% and +0.96%, respectively, while Market neutral strategies had positive performance, with the HFRX Equity Market Neutral Index gaining +0.41%.

The HFRX Relative Value Arbitrage Index posted a gain of +1.72% for January, with gains across all Relative Value strategies. Tightening of yields spreads and improved equity markets favored convertible strategies, with the HFRX Convertible Arbitrage Index and the HFRX RVA Multi-Strategy Index gaining +2.13% and +1.59%, respectively. Fixed Income-Corporate strategies were also positive for the period, while Yield Alternative/Energy Infrastructure experienced declines.

The HFRX Macro/CTA Index gained +0.09% for the month, from positive contribution from fixed-income and agricultural commodities exposure, partially offset by declines in systematic diversified funds. Short-term systematic strategies declined while medium-term funds posted gains, with HFRX Systematic Diversified CTA Index posted a decline of -1.00% for the month. Discretionary global rates currency managers posted gains, while commodity strategies had mixed performance.

Comments reference performance figures as posted on February 3, 2012

(press release)

Full performance table here.

BG