Hedge fund industry grows by US$55bn in 2011 despite challenging year

Eurekahedge Hedge Fund Index flat in December, down 4.16% at year end 2011

The Eurekahedge Hedge Fund Index was down 0.21%in December as volatile market conditions continued into the last month of the year. The index was down 4.16% for the year, making it the 2nd worst yearly return on record. Hedge funds still outperformed the underlying markets, however. This outperformance was led by larger hedge funds, as evidenced by the capital-weighted Mizuho-Eurekahedge Top-100 Index, which was up 2.01% in 2011. The MSCI World Index was down 0.4% in December and 9.9% for the year.

Key highlights for December 2011:

• 2011 was the 2nd worst year on record with the Eurekahedge Hedge Fund Index down 0.21% in December and 4.16% in 2011.
• The asset-weighted Mizuho-Eurekahedge Top-100 Index finished the year with gains of 2% showing that the larger funds performed better than the overall industry.
• Total asset flows for the year were US$67 billion, taking the size of the industry to US$1.72 trillion.
• Launch activity remained strong throughout 2011 with more than 1,100 funds launches in the year (the 2nd highest total on record) - capital raising remains as tough as it ever has been however.
• Latin American hedge funds provided the best returns for the year: up 2.84%.
• Fixed income and arbitrage were the best performing strategies for the year – up 1.19% and 0.71% respectively.
• Japanese hedge funds outperformed the Topix by 17.9% in 2011.
• The Eurekahedge Long Only Absolute Return Fund Index witnessed its fourth annual decline in 2011, down 13.63% for the year. 
• Relative value hedge funds witnessed the largest percentage increase in AuM (year-on-year) during 2011, with gains of 20% for the year.
• CTA/managed futures funds and macro hedge funds attracted the most money from investors in 2011, gaining US$19 billion and US$16 billion respectively in net positive asset flows.
• Distressed debt hedge funds saw the best returns in 4Q 2011, gaining an relatively impressive 2.69%.
• Long/short equity funds were the worst performers during 2011, as they saw losses of 7.43%

To read more, please see the full Eurekahedge Index Flash, also accessible on Scribd and Issuu.