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Index Flash

Hedge funds record seventh consecutive month of positive returns

February 2011

After ending 2010 with excellent results, the hedge fund industry took a
breather in January and delivered a flat to slightly positive performance.
The Eurekahedge Hedge Fund Index was up 0.01%1 in January – a
month marked with mixed returns among underlying strategies2. The
MSCI World Index advanced 1.87%3 during the month.

Below are the highlights for January:

Assets under management in global hedge funds cross US$1.67


trillion.

Strong launch activity continued into 2011, with more than 30


hedge funds launched in January.

Hedge funds witnessed the seventh consecutive month of


positive returns.

Hedge funds investing in Japan and Eastern Europe & Russia


delivered the best performances, up 1.36% and 2.37%,
respectively.

Main Indices
Table 1: Main Indices
Jan 2011 2011 2010
Index
Est1 Returns Returns
Eurekahedge Hedge Fund Index 0.01 0.01 10.90
Eurekahedge Fund of Funds Index -0.28 -0.28 4.41
Eurekahedge Long-Only Absolute
-0.62 -0.62 14.83
Return Fund Index
Eurekahedge UCITS Hedge Fund
-0.48 -0.48 9.57
Index

Japanese hedge funds delivered the best performance among the main
hedge fund regions4, gaining 1.36% in January. Managers leveraged on
the better-than-expected earnings, corporate activity and a strong yen to
outperform the Nikkei 225 which was up 0.09% in the month. Returns
from other developed economies were also positive, with the
Eurekahedge North American Hedge Fund Index gaining 0.67% while
European hedge funds advanced 0.10% during the month. Stronger
outlook on the US economy, as well as easing concerns over the
European debt situation, drove up the regional markets – the S&P 500
rose 2.26% while the MSCI Europe Index climbed 1.83% in January.

Returns from emerging markets hedge funds were mixed as Latin


American hedge funds witnessed losses of 0.44% while Asia ex-Japan
hedge funds gained 0.24% in January. However, these figures
underscore a significant outperformance by the managers as regional

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Index Flash

Hedge funds record seventh consecutive month of positive returns

market indices ended the month in negative territory. The MSCI EM Latin
America Index was down 4.17% while the MSCI AC Asia Pacific Ex Japan
Index lost 0.59% in January. The best performance among emerging
market mandates was delivered by hedge funds investing in Eastern
Europe and Russia, up 2.37%, as managers capitalised on the rallies in
underlying markets. The MSCI EM Eastern Europe Index increased by
1.52% while the Russia AK&M Composite Index finished the month with
excellent gains of 5.68%.

Regional Indices
Table 2: Regional Indices
Jan 2011 2011 2010
Index
Est1 Returns Returns
Eurekahedge North American Hedge
0.67 0.67 13.93
Fund Index
Eurekahedge European Hedge Fund
0.10 0.10 9.18
Index
Eurekahedge Eastern Europe & Russia
2.37 2.37 16.94
Hedge Fund Index
Eurekahedge Japan Hedge Fund
1.36 1.36 8.03
Index
Eurekahedge Emerging Markets
-0.13 -0.13 10.85
Hedge Fund Index
Eurekahedge Asia ex-Japan Hedge
0.24 0.24 11.15
Fund Index
Eurekahedge Latin American Hedge
-0.44 -0.44 9.69
Fund Index

Strategy Indices

Hedge funds employing fixed income strategies stood out with the best
performance among the different strategic mandates in January. The
Eurekahedge Fixed Income Hedge Fund Index advanced 2.45% during
the month5 while distressed debt managers gained 1.56% as high yields
continued their rally into the new year. Managers employing pair trading
strategies also witnessed healthy returns – the Eurekahedge Relative
Value Hedge Fund Index increased 1.42% in the month while
arbitrageurs witnessed positive returns of 1.32%.

Table 3: Strategy Indices


Jan 2011 2011 2010
Index
Est1 Returns Returns
Eurekahedge Arbitrage Hedge Fund
1.32 1.32 9.30
Index
Eurekahedge CTA/Managed Futures
-1.27 -1.27 12.55
Hedge Fund Index
Eurekahedge Distressed Debt Hedge
1.56 1.56 21.61
Fund Index
Eurekahedge Event Driven Hedge
0.42 0.42 15.78
Fund Index
Eurekahedge Fixed Income Hedge
2.45 2.45 10.31
Fund Index
Eurekahedge Long/Short Equities
0.12 0.12 10.20
Hedge Fund Index

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Index Flash

Hedge funds record seventh consecutive month of positive returns

Eurekahedge Macro Hedge Fund


-0.02 -0.02 7.70
Index
Eurekahedge Multi-Strategy Hedge
-0.03 -0.03 9.44
Fund Index
Eurekahedge Relative Value Hedge
1.42 1.42 12.08
Fund Index

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1
Based on 33.82% of the funds reporting their January 2010 returns as of 9 February 2011.

2
It should be noted though that since CTA/managed futures funds are the easiest to value,
they make up a larger bulk of the index at this early reporting stage and hence, their negative
performance in the month will skew the index initially.

3
The MSCI World Index Free – Local Currency

4
Not including Eastern Europe and Russia as it is a relatively new region for hedge funds with
a small number of funds.

5
The Index positively skewed due to a smaller number of early reporting funds and an
exceptional return by one fund.

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