January 2011 Hedge Fund Performance Commentary
Hedge funds were up for the sixth consecutive month in December, posting a return of 3.01%
for themonth as global markets rallied at yearµs end on the back of an upbeat US market outlook. The
Eurekahedge Hedge Fund Index
posted double digit growth during 2010, ending the year with a gainof 10.93% and beating the underlying markets by more than 3.10%. The MSCI World Index
was up5.55% in December and 7.83% for the year. All regions delivered healthy performance in December, with Japanese managers coming out aheadwith an excellent return of 4.09%. Japanese managers outperformed the Nikkei, which was up 2.94%in the month as positive momentum built up in November continued into the next month. Japanesehedge funds focusing on small caps raked in the largest gains, as the TSE Mothers Index witnesseddouble-digit growth in December. Going into 2011, the outlook for Japanese hedge funds remainspositive as corporate earnings continue to grow and the overall economic environment seems to beimproving with positive forecast revisions from economists. The
Eurekahedge North American Hedge Fund Index
advanced 3.25% in December as managersmaintained a net long bias throughout the month. Increased risk appetite led to a strong market rally ±the S&P 500 was up 6.53% in December as improving economic indicators in the US and better-than-expected earnings estimates drove up investor sentiment. In addition to equities, high yields alsomade significant gains as risk assets were in high demand
the Merrill Lynch High Yield Index
ended the month 1.76% higher.European managers posted excellent figures for December with the
Eurekahedge European HedgeFund Index
up 3.20%, while Latin American and Asia ex-Japan hedge funds delivered strong gains of 1.44% and 1.23%, respectively.
Figure 1: November and December 2010 returns
Based on 58.32% of the funds reporting their NAV for December 2010 asof 14 January 2011.
MSCI The World Index Free ± Local Currency
Bank of American Merrill Lynch High Yield Master II Index ± Local Currency