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February 2011 Hedge Fund Performance Commentary

Introduction

Hedge funds were up for the seventh consecutive month in January, posting a marginal result of 0.06%1  for the month. Price movements in global markets were erratic in a month marked by various themes including improving economic fundaments in the US, political instability in the Middle East and rising inflationary pressure. The MSCI World Index was up 1.87% in January.

Japanese hedge funds delivered the best performance among the main hedge fund regions, gaining 1.26% 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% during the month. Returns from other developed economies were also positive, with the Eurekahedge North American Hedge Fund Index gaining 0.75% while European hedge funds were up 0.24%. Stronger outlook on the US economy, as well as easing concerns on the European debt situation, drove up the regional markets – the S&P 500 climbed 2.26% while the MSCI Europe Index gained 1.83% during the month.

Returns from emerging markets hedge funds were mixed as Latin American hedge funds witnessed marginal losses of 0.10% while Asia ex-Japan funds were down 1.20% in January. The regional market indices also 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%. Notable among emerging market hedge funds were managers investing in Eastern Europe & Russia, who gained 2.20% during the month. Eastern Europe & Russia mandate hedge funds capitalised on the rallies in underlying markets as the MSCI EM Eastern Europe Index was up 1.52% while the Russia AK&M Composite Index finished the month with an excellent gain of 5.68%.

December 2010 and January 2011 returns

The relatively modest returns across the regions came after a period of strong performance by hedge funds at the end of 2010. The Eurekahedge Hedge Fund Index was up...

 

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Footnote

1Based on 54.19% of funds reporting the January 2011 returns as of 14 February 2011.