Hedge Funds End 2009 On A High
Thursday, January 14, 2010

Hedge funds had a successful 2009 according to this week's report from the Greenwich Global Hedge Fund Index (GGHFI), although they underperfomed standard equity indices.

The GGHFI returned +0.97% for December (+19.38 for the year-to-date) while the Greenwich Composite Investable Index (“GI2”) advanced by +0.06% during the month (+4.16% year-to-date). Global equity returns for the month were S&P 500 Total Return +1.93% (+26.45% year-to-date), MSCI World Equity +1.69% (+26.96% year-to-date) and FTSE 100 +4.28% (+22.06% year-to-date).

“The majority of hedge funds ended 2009 with excellent results. The average fund has traded near or above its high water mark of last year. Over a two-year period, the downside protection of hedge funds made them a substantially more rewarding investment than long-only funds and equity index products,” notes Clint Binkley, Senior Vice President.

Long/Short Equity managers were the best performing strategy group in December, gaining +2.28% (+23.35% year-to-date). Growth funds performed slightly better than Value managers in 2009, returning +28.93% and 24.82%, respectively. Short-biased funds lost (-14.91%) on average in 2009 but are still up more than 10% over a 2 year period. Market Neutral funds gained +1.69% in December and +18.37% during the year. The Event Driven sector performed moderately better than Arbitrage funds as a whole, although pockets of the Arbitrage space enjoyed their best year on record. Convertible Arbitrage managers closed the year with a gain of +2.17% on the month and +49.42% for the year to become the best performing hedge fund sector during 2009. Fixed Income Arbitrage funds turned in a +22.22% gain during the year, moderately higher than the gain of +15.86% achieved by Other Arbitrage managers. Event Driven managers enjoyed a profitable December and advanced by +3.00%, driven by Distressed and Special Situations funds, which gained +2.97% and 4.24%, respectively. For the year, Event Driven and Distressed Securities funds advanced 300 basis points more than Long/Short Equity funds.

The GGHFI is one of the oldest benchmarks of the hedge fund universe. Final index results for December will be available mid-January, once additional funds have submitted returns. The GI2, comprising 40 constituent funds, adds investability, active management, and liquidity to the diversification and performance benefits of the broad Greenwich Global Hedge Fund Index. It references actual hedge fund vehicles as opposed to separately managed accounts or other methods used in an attempt to replicate the returns of hedge fund vehicles.