Hedge Funds Turn In Solid Start to 2012

Hedge funds are off to a robust start in 2012, with data showing the industry enjoyed its second-best month in two years last month, according to Hedge Fund Research Inc.

Equities-focused hedge funds were among the strongest performers in January, with the HFRI Equity Hedge Index climbing 3.84 percent on the strength of stellar performances by fundamental growth, value and energy/basic materials sub-strategies. Meanwhile event-driven and relative value arbitrage hedge funds turned in solid gains as well, climbing 2.4 and 2.3 percent, respectively.

But despite the solid performance, hedge funds were still outclassed by the Standard & Poor's 500 index, which increased 4.48 percent last month, according to Dow Jones. Emerging market hedge funds were the only ones to surge past that figure, climbing 5.3 percent in January. That performance was lifted by hedge funds who focus on Russia/Eastern Europe and Latin America, which saw gains of 9.2 and 6.9 percent, respectively, HFR's data showed.

Macro strategies lagged a bit by comparison the data showed, posting a climb of 1.1 percent. And despite underlying asset volatility, currency and commodity-focused funds managed to squeak out a gain of 0.32 percent, according to the HFRI Macro: Systemic Diversified Index.

"January performance for hedge funds was driven by a number of positive factors, with these generally constituting a reversal of the cyclically high levels of risk aversion which influenced not only fundamental asset price convergence, but also capital allocations by leading investors throughout 2011," HFR president Kenneth Heinz said in a statement.

But even with the equities market off to strong start to kick off the year, Heinz said a "dynamic risk environment" across currencies, commodities, strategic acquisitions, fixed income and emerging markets will create long and short opportunities throughout the year.

As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio