Index Flash

Hedge Funds up 10.86% in 2010

January 2011

Hedge funds delivered excellent returns of nearly 3% 1 in December to

end the year on a high note. The Eurekahedge Hedge Fund Index
finished 2010 with gains of 10.86%. Growing optimism about the US
economy led to rallies in underlying markets – the MSCI World Index2
was up 5.55%, with 2010 returns of 7.83%.

Below are the highlights for December:

Hedge funds posted double-digit growth in 2010 and

outperformed underlying markets – up 10.86% for the year.

December was the 6th consecutive month of back-to-back

positive returns for hedge funds.

Japanese hedge funds posted best annual return in 5 years, up

6.79% in 2010.

North American hedge funds witnessed the best December

returns since 2000, up 3.48%.

North America was the best performing hedge fund region in

2010 up 13.63% in the year.

Hedge funds attracted US$70 billion through net positive asset

flows in 2010 – total size of industry exceeded US$1.65 trillion
for the first time since September 2008.

For a full breakdown of 2010 asset flows, performance trends and

key trends in North American hedge funds, please see the
upcoming January issue of The Eurekahedge Report, which will
be released on the 18th of January.

Main Indices

Dec 2010 2010 YTD 2009

Index
Est1 Returns Returns
Eurekahedge Hedge Fund Index 2.98 10.86 19.89
Eurekahedge Fund of Funds Index 1.83 4.33 9.48
Eurekahedge Long-Only Absolute
3.29 14.43 47.49
Return Fund Index
Eurekahedge Islamic Fund Index 2.95 10.05 21.57

1
 Index Flash

Hedge Funds up 10.86% in 2010

In terms of regional mandates, North American managers were the best

performers in December as the Eurekahedge North American Hedge Fund
Index gained 3.48%. Managers maintained a net long bias throughout
the month, which was marked by increased risk appetite, leading to a
strong market rally – the S&P 500 was up 6.53% in December.
Improving economic indicators and better-than-expected earnings
estimates drove up investor sentiment, with equities and high yields
making significant gains. North American hedge funds were also the best
performers as a whole, amongst all major hedge fund regions for 2010,
ending the year with gains of 13.63%, outperforming the S&P 500 which
was up 12.78%.

All other regional hedge funds ended December with positive returns,
with major regions outperforming underlying markets in the 2010 return
figure. Japanese hedge funds finished the year with gains of 6.79% –
their best performance in five years. This return is especially significant
as the Japanese market witnessed significant volatility during the year –
the Nikkei was down 3.01% in 2010. Asia ex-Japan managers posted
another year of double-digit growth, gaining 10.42%, while the MSCI
Asia Pacific Ex Japan Index3 was up 8.13% over the same period.

Regional Indices

Dec 2010 2010 YTD 2009

Index
Est1 Returns Returns
Eurekahedge North American Hedge
3.48 13.63 23.52
Fund Index
Eurekahedge European Hedge Fund
2.67 8.91 20.30
Index
Eurekahedge Eastern Europe & Russia
5.73 17.38 59.74
Hedge Fund Index
Eurekahedge Japan Hedge Fund
2.51 6.79 6.09
Index
Eurekahedge Emerging Markets
1.58 10.37 35.74
Hedge Fund Index
Eurekahedge Asia ex-Japan Hedge
1.33 10.42 38.17
Fund Index
Eurekahedge Latin American Hedge
1.03 9.49 28.54
Fund Index

All strategies ended December in positive territory, with CTA/managed

futures funds delivering the best performance, up 4.71%. A weakening
US dollar and strong outlook for 2011 drove up the prices of commodity
contracts, with several soft commodities reaching record highs. Energy
prices rose to their highest level since October 2008, while gold also
reached a new record high. Gains in equity markets were effectively
captured by long/short equity and event driven managers, up 2.87% and
3.71%, respectively, while distressed debt hedge funds also delivered
excellent gains of 2.57%. The best performing strategy for 2010 was
distressed debt, with managers gaining 21.31% for the year and
outperforming the BAML High Yield Master II Index, which was up
15.19% in the year.

Strategy Indices

Dec 2010 2010 YTD 2009

Index
Est1 Returns Returns
Eurekahedge Arbitrage Hedge Fund 2.10 10.16 23.54

2
 Index Flash

Hedge Funds up 10.86% in 2010

Index
Eurekahedge CTA/Managed Futures
4.71 11.86 3.42
Hedge Fund Index
Eurekahedge Distressed Debt Hedge
2.57 21.31 33.08
Fund Index
Eurekahedge Event Driven Hedge
3.71 16.10 39.48
Fund Index
Eurekahedge Fixed Income Hedge
0.51 9.65 22.22
Fund Index
Eurekahedge Long/Short Equities
2.87 9.93 23.82
Hedge Fund Index
Eurekahedge Macro Hedge Fund
1.80 7.75 13.04
Index
Eurekahedge Multi-Strategy Hedge
1.88 9.42 21.02
Fund Index
Eurekahedge Relative Value Hedge
2.13 11.80 21.16
Fund Index

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1
Based on 28.52% of funds which have reported December 2010 returns as of 10 January
2011.

2
MSCI The World Index Free – Local Currency

3
MSCI AC Asia Pacific Ex Japan Index – Local Currency

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