January 2010

Credit Suisse | Tremont Hedge Fund Index

www.credit-suisse.com

Hedge Funds Hit a High Note

2009 Industry Review

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significant. Past performance is not a guarantee or indicative of future results. See “Important Legal Information” at the end of this document.
January 2010

The Year

in Review: 2009 Highlights and Key Points of Hedge Funds in the
Index

 2009 marks the best annual hedge fund performance in a decade, as measured by the
Credit Suisse/Tremont Hedge Fund Index, and the greatest performance rebound since
inception of the Index in 1994

 83% of all funds posted positive performance in 2009

 Overall, hedge funds have recouped 77% of 2008 losses from previous peak performance

levels, or “high water marks”

 An estimated 58% of all “impaired” assets have returned to standard liquidity status,
representing a total of $102 billion. An additional $72 billion in impaired assets currently

remain illiquid

 The hedge fund industry experienced net inflows of $12 billion in the fourth quarter, however
the industry lost $74 billion as a result of investor redemptions in 2009

 The Long/Short Equity sector experienced the most significant inflows ($7 billion) in the
second half of 2009 as investors sought to capitalize on the directional, liquid nature of the
strategy

 Including performance gains, current industry assets under management (AUM) are
estimated at $1.5 trillion as of December 31, 2009. This is up from approximately $1.3
trillion mid-year

 The percentage of closed funds in the industry has dropped from 17% to 13% since

November 2007 , signifying increased investor access to some of the industry’s most in-
demand managers

 The growing popularity of hedge fund type products marketed through retail channels could
provide a significant source of new revenues for the hedge fund space going forward

 Credit Suisse/Tremont Hedge Fund Index is the source of all data listed below. All internally developed data and other
third party sources are believed to be reliable. Credit Suisse has not sought to independently verify information obtained
from public and third party sources and makes no representations or warranties as to accuracy, completeness or
reliability of such information.
 Previous peak index performance levels occurred in June 2008. Data based on an analysis of funds within the Index.
A high water mark is defined as the highest peak in value that a hedge fund has reached; however, it should be noted
that high water marks will differ from investor to investor depending on their entry point into the fund. For the purposes
of this analysis, we refer to the high water mark as the highest peak in value of the overall industry or sector prior to the
financial crisis which occurred in 2008.
 Data as of December 31, 2009. Please see page 5 for a complete description of “impaired” assets.
 Based on a survey performed by Credit Suisse/Tremont Hedge Fund Index. Data as of December 31, 2009.

Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review 
 January 2010

The Year in Review

Reviewing a Year Overall, the hedge fund industry returned 18.6% in 2009 marking its best annual perform-
of Change ance in a decade and signaling the greatest performance rebound in the hedge fund industry
since inception of the Credit Suisse/Tremont Hedge Fund Index (the “Index”) in 1994. With
2008 represented the first year the exception of February when funds fell 0.9%, hedge funds posted positive returns each
in a decade during which hedge month during the year with approximately 83% of all funds ending the year in positive territory
funds failed to deliver absolute
returns. As a result, investor (Figure 1).
calls for change have driven
the most noteworthy trends Figure 1: 2009 Hedge Fund Performance Statistics by Sector
seen in 2009, including greater Annualized Number of Number of Best Worst
investor focus on transparency, Sector Cumulative Standard Positive Negative Performing Performing
liquidity, risk management Jan 09 - Dec 09 Weights Return Deviation Funds Funds Fund Fund
and operational due diligence. Broad Index 100.0% 18.6% 4.7% 395 82 267.0% -80.3%
These key issues, featured Convertible Arbitrage 1.8% 47.3% 6.6% 22 1 267.0% -2.8%
prominently across industry 0.4% -25.0% 15.5% - 9 -0.4% -40.5%
Dedicated Short
headlines over the past year,
Emerging Markets 8.5% 30.0% 8.8% 69 10 195.2% -26.2%
will likely continue to be areas
of focus in the year ahead. Equity Market Neutral 2.2% 4.0% 7.7% 14 8 28.2% -80.3%
Event Driven 25.6% 20.4% 4.9% 61 8 130.4% -26.2%
Key Issues in 2009 Fixed Income Arbitrage 3.6% 27.4% 3.9% 25 2 132.3% -7.2%
Global Macro 17.3% 11.6% 5.1% 26 7 116.1% -25.3%
Focus on Transparency and Equity Long Short 23.0% 19.5% 6.7% 141 11 233.2% -24.7%
Liquidity: Lessons learned Managed Futures 4.1% -6.6% 9.5% 10 23 24.0% -36.7%
from the events of 2008 Multi-Strategy 13.5% 24.6% 4.5% 27 3 83.6% -17.6%
have led to investor demand
for increased transparency Source: Credit Suisse/Tremont Hedge Fund Index. All internally developed data and other third party sources believed to be reliable.
Credit Suisse has not sought to independently verify information obtained from public and third-party sources and makes
and liquidity. The attention no representations or warranties as to accuracy, completeness or reliability of such information.
being paid to these areas
underscores investor interest
in playing a more active role The performance of certain sectors including Event Driven, Long/Short Equity and Emerging
in the investment process Markets drew renewed interest from investors, particularly in the second half of 2009. Many
going forward. This has
also facilitated increased
investors appear to believe the Event Driven sector, the largest sector and one which has con-
communication between clients sistently ranked as one of the top performing index strategies over time, is poised to capitalize
and investors, spotlighting the on opportunities created by the market dislocation. An increasing number of global mergers
importance of investor relations
in terms of client prospecting
and acquisitions as well as corporate consolidations and restructurings could provide lucrative
and retention. prospects for the year ahead.

Operational Due Diligence:
Following a number of hedge
fund failures in 2008 and
early 2009, investors are now
placing increased emphasis
on due diligence practices,
including greater analysis
of hedge fund operations,
compliance, control and risk
management in addition to
requesting greater transparency
from managers. However, along
with additional transparency
comes an additional burden
on the investor to process the
increased inflow of information,
leading many to anticipate
renewed growth in the fund of
hedge funds space.
In 2009, investors also began to turn toward liquid, directional strategies such as Long/Short
Equity and Emerging Markets. As equity markets rallied Long/Short Equity managers capital-
ized on the upside, steadily increasing net exposures and securing gains in their long books to
finish the year up 19.5%. An increase in risk appetite and strong equity rallies in developing
nations also drove investor interest in the Emerging Markets strategy while optimism about
global growth, rising commodities prices and positive macro economic data also buoyed sup-
port for emerging market economies. China remains a particular area of interest due to its
strong growth prospects and positive macro economic data continues to support this notion.
In December, the purchasing managers’ index (PMI), a key measure of China’s manufacturing
activity, reached a 20-month high indicating further expansion of activity in the region.
Finally in the year’s most significant comeback story, Convertible Arbitrage managers attracted
a number of headlines in 2009. In the wake of a ‘perfect storm’ of adverse market conditions
during the fourth quarter of 2008 the strategy fell significantly as increased selling pressure
and tightened liquidity led to pricing imbalances in the sector. Yet these same factors worked in
many managers’ favor going into 2009 and most were able to successfully capitalize on pric-
ing imbalances while low valuations and attractive credit spreads attracted new entrants to the
market and eased liquidity constraints. Overall Convertible Arbitrage registered the strongest
performance of all sectors this year finishing up 47.3% through December. As markets begin
to normalize we expect that fundamentals and security selection will gain importance in both
this sector as well as other hedge fund strategies going forward.

 Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review
January 2010

While many hedge funds finished 2008 in the red, an examination of the return dispersion
Reviewing a Year among the individual funds within each sector illustrates the significant turnaround experienced
of Change in the space this year (Figure 2). In 2009, the bulk of returns, shown as the dark blue boxes
(one standard deviation from the mean in either direction), were positive across most strate-
Regulatory Oversight: gies. It is interesting to note that the Managed Futures and Dedicated Short Bias sectors were
The call for increased regulation the only two sectors to finish 2008 in positive territory, yet both struggled with challenging
was a hallmark of the media’s
coverage of hedge funds in market conditions in 2009.
2009. New governmental
proposals such as the Hedge Figure 2:
Fund Transparency Act in the
U.S. and a draft directive from 2009 Average Strategy Returns (data as of December 31, 2009)
the European Commission, are
300%
aimed at limiting hedge funds’ 267.0%
233.2%
potential for systemic risk and 250%
195.2%
call for increased transparency 200%
and accountability of funds. To 150% 130.4% 132.3%
116.1%
the extent that regulation aids 83.6%
100%
in providing more transparency, 300%
267.0%
many believe changes could 50%
250% -0.4%
28.2%
233.2% 24.0%

serve to bolster investor 0%

200%
195.2%
confidence in the industry. -50%
-2.8%
-26.2% -26.2%
-7.2%
-25.3% -24.7% -17.6%
-40.5% 130.4% 132.3% -36.7%
While the full scope of any 150% 116.1%
-100% -80.3%
regulatory action is yet to be 100%
Convertible Dedicated Short Emerging Equity Market Event Driven Fixed Income Global Macro Long/Short Managed
83.6%
Multi Strategy
determined, one point that is 50% Arbitrage Markets Neutral
28.2% Arbitrage Equity Futures
24.0%
widely accepted is that any 0%
-0.4%

successful directive will need -2.8% -7.2% -17.6%

-50% -26.2% -26.2% -25.3% -24.7%
support and implementation on -40.5% -36.7%

a global level which includes -100% -80.3%

Convertible Dedicated Short Emerging Equity Market Event Driven Fixed Income Global Macro Long/Short Managed Multi Strategy
increased communication 2008 Average
Arbitrage Strategy Returns
Markets Neutral (data as of Arbitrage
December 31, Equity
2008) Futures
across regulatory bodies to
identify systemic risks. 100% 93.0%
93.0%
100%
80% 67.8% 66.3%
80% 67.8% 66.3%
Distressed Opportunities: 60%
60% 36.1%
47.0%
47.0%
36.1% 32.6% 25.7%
Interest in secondary markets 40%
40% 11.8%
26.8%
26.8% 32.6%
13.9% 25.7%
20%
grew in 2009 as investors 20% 11.8% 13.9%
0%
sought ways to capitalize on 0%
-20% -4.4%
the availability of assets at -20%
-40%
-4.4%
-40%
distressed prices. For those -60%
-60%
-48.8%
-48.8%
with cash on hand these -80%
-80%
-60.9%
-60.9% -77.5% -74.6%
-65.2%
-65.2% -68.3%
-68.3% -77.0% -93.1%
-77.5% -74.6% -77.0% -93.1%
investments may represent -100%
-100%
-100.0%
-100.0%
significant alpha opportunities, Convertible Dedicated Short Emerging Equity Market Event Driven Fixed Income Global Macro Long/Short Managed Multi Strategy
Arbitrage Markets Neutral Arbitrage Equity Futures
and while some of the more
severe pressures on hedge
funds have waned since
2008 these markets have
Source: Credit Suisse/Tremont Hedge Fund Index. All internally developed data and other third party sources believed to be reliable.
been instrumental in providing
Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes
certain funds and investors with no representations or warranties as to accuracy, completeness or reliability of such information.
needed liquidity which will likely
lead to the continued popularity
of these markets within the
investment community.

Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review 
 January 2010

Defining Recovery Hedge Fund Recovery Analysis

Recovered: Funds that have
regained all previous losses to
meet or surpass previous peak
levels
Recovering: Funds that have
partially regained losses from
their lowest drawdown point (or
“trough”)
Not Recovered: Funds that
have not regained any value
from their lowest drawdown
point, and/or funds that
have continued to decline in
value between January and
December 2009

Hedge funds experienced their most significant drawdown on record when hedge fund perform-
ance fell 19.5% between June 30 and December 31, 2008. Improving market conditions have
aided hedge funds’ ability to regain many of those losses in 2009. As illustrated in Figure 3,
76.7% of all 2008 losses were earned back in 2009, with 28% of funds now fully recovered
from their maximum drawdowns, i.e. these funds have regained all losses experienced in 2008
and are now on par with, or have surpassed, previous peak performance levels or “high water

marks.”
While global equity markets (as represented by the MSCI World Index) returned 27% for the
year, as a whole they have regained a smaller percentage of overall losses than hedge funds
and the current drawdown remains at 26.5% as of December 31, 2009.
Figure 3: Drawdown Analysis, Credit Suisse/Tremont Hedge Fund Index
and MSCI World Index (data as of December 31, 2009)
106
Peak Current drawdown

-4.5%
96
Cumulative Performance

86
-19.5%

Trough
76 -26.5%

66

56
-52.7%

46
Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09

Source: Credit Suisse / TremontCredit

HedgeSuisse/Tremont Hedge
Fund Index, Blomberg. Fund
Data Index
based on a sampleMSCI
set of World Index of the Credit Suisse
funds reflective
/ Tremont Hedge Fund index as of December 31, 2009. Credit Suisse has not sought to independently verify information
obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or
reliability of such information.

 Since inception of the Index in January 1994.

 Based on an analysis of funds within the Index. All data was obtained from publicly available information, internally
developed data and other third party sources believed to be reliable. A high water mark is defined as the highest peak
in value that a hedge fund has reached; however, it should be noted, that high water marks will differ from investor to
investor depending on their entry point into the fund. For the purposes of this analysis, we refer to the high water mark
as the highest peak in value of the overall industry or sector prior to the financial crisis which occurred in 2008.

 Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review
January 2010
Classifying
Imparied Funds
Suspended Redemptions:
Certain hedge funds may
temporarily suspend or defer
redemptions as a defensive
measure to avoid disruptive
liquidation of positions.
Sidepocket:
Sidepocketing occurs when
hedge funds segregate illiquid
assets from liquid assets.
Gate Provisions: A fund
will typically impose a gate
provision to restrict the amount
of withdrawals from the fund
during a redemption period.
Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review
Liquidity: A Marked Improvement
Overall, the liquidity profile of the industry improved significantly in 2009 with the rate of
recovery outpacing many expectations. Further, the performance of “impaired” assets, mean-
ing assets in a fund that had either suspended redemptions, implemented gate provisions or
allocated the assets to a sidepocket (see “Classifying Impaired Funds” for a description of
impaired funds) has for the most part been stronger than initially anticipated.
Based on an analysis of funds within the Index, we estimate that of the $1.5 trillion in hedge
fund assets under management as of December 31, 2008, approximately $174 billion were
considered impaired in some fashion. Of this $174 billion, we estimate approximately $102
billion has been returned to standard liquidity terms as of December 31, 2009, while $72 billion
continues to remain illiquid. Further, many funds report that they will continue to be in a position
to honor redemption requests and repay investors more quickly than originally anticipated.
Figure 4: Estimated Liquidation of Impaired Assets

(data as of December 31, 2009)
$174 billion in assets estimated as impaired as of 12/31/2008
$174
$154
$134
$114
USD billions
$94
$74
$54
$34
$14
-$6
Q1 2009 Q2 2009 Q3 2009 Q4 2009
Total Assets Returned to Standard Liquidity Terms Total Impaired Assets
Source: Credit Suisse/Tremont Hedge Fund Index. All data was obtained from publicly available information, internally developed
data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information
obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or
reliability of such information.
Developing Trends
The issue of hedge fund liquidity made headlines following the events of 2008 and, in turn,
managers have taken steps to reassure investors that they will have access to their assets
in the future. The trend toward decreasing lock-up periods within the industry illustrates this
point. While there are no standard solutions being applied across funds, investors are generally
seeing more flexible terms being offered to investors as funds seek to strengthen relationships
with clients as well as entice new assets; for example, funds with standard lock-up periods may
now permit a client to exit early for a fee.
 Data based on a sample set of funds reflective of the Credit Suisse/Tremont Hedge Fund Index as of
December 31, 2009.

 January 2010

Asset Flows: What a Difference a Year Makes

In 2008, investors pulled about $99 billion from the hedge fund space representing the first
time the industry saw net annual outflows since inception of the Index in 1994. Fast forward to
Q4 09 and a rebound was evident with net inflows into the hedge fund space totaling $12 bil-

lion, marking the second consecutive quarter of positive flows into the space as investor inter-
est returned to the overall asset class (Figure 5). Yet despite positive inflows in the second half
of the year overall asset flows were negative for 2009; however, the positive trend indicates
that the industry is making strides towards recovery and is well positioned entering 2010.
Figure 5: Estimated Quarterly Asset Flows (as of December 31, 2009)
$20

$0

-$20
Flows (USD billions)

-$40

-$60

-$80

-$100

-$120

-$140
Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009

Source: Credit Suisse/Tremont Hedge Fund Index. All data was obtained from publicly available information, internally developed
data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information
obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or
reliability of such information.

As demonstrated in Figure 6, while nine out of ten sectors in the Broad Index experienced asset
outflows in the first half of 2009 only four sectors — Convertible Arbitrage, Dedicated Short
Bias, Managed Futures and Fixed Income Arbitrage — saw outflows in the second half of the
year. Together, these sectors represent 9.8% of overall industry AUM as of 12/31/2009.

Figure 6: 2009 Estimated Asset Flows by Sector (as of December 31, 2009)
$10
6. 7 7. 1

$5 2. 9
2. 2 1. 8
0. 7 0. 2
(0. 1)
$0
(0. 9) (0. 7) (0. 4)
Flows (USD billions)

(1. 3) (1. 7)
-$5
(4. 8)
(6. 0) (6. 1) (6. 5)
-$10

-$15

-$20
(19. 5)
(20. 6)
-$25
(26. 5)
-$30
Convertible Dedicated Emerging Equity Market Event Driven Fixed Income Global Macro Long/Short Managed Multi-Strategy
Arbitrage Short Bias Markets Neutral Arbitrage Equity Futures

Flows H1 2009 Flows H2 2009

Source: Credit Suisse/Tremont Hedge Fund Index. All data was obtained from publicly available information, internally developed
data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information
obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or
reliability of such information.

 Revised from a previously published September 2009 estimate based on additional data received.

 Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review
January 2010

The majority of new assets entering the space in the second half of the year were funneled
into the Long/Short Equity sector. Interest in the space was primarily driven by investors seek-
ing to capitalize on the directional return potential of a bullish market environment as well as
the inherently liquid nature of the strategy. Also, despite underwhelming performance for the
year, the Managed Futures sector experienced an increase in new capital with net inflows of
$3 billion in 2009 as long-term investors appeared primed to capitalize on returns driven by the
bounce back in commodity markets. The Equity Market Neutral space, which makes us 2.2%
of overall industry assets (as of 12/31/09), saw the largest percentage of net inflows with
respect to total sector AUM as the strategy’s low correlation to general market movement and
its potential diversification benefits amid market dislocations attracted new interest.
In one of the most interesting trends seen in the hedge fund space this year, many hedge
fund managers have increasingly begun to turn to less traditional channels in an effort to raise
capital. The majority of hedge fund assets have historically come from high net worth and
institutional investors. However, in many cases these investors saw a more significant percent-
age of their assets negatively affected by liquidity constraints in 2008 and as a result they
were unwilling to quickly reallocate to the asset class. In turn, hedge fund managers seeking
a diversified investor base began exploring distribution opportunities through retail channels,
creating various exchange traded products, mutual funds, and UCITS III funds which provided
exposure to a previously untapped client base. In general, registered fund assets have potential
to provide more stable assets and generate relatively steady fees making these vehicles attrac-
tive to many managers.
Overall, we estimate total industry AUM is currently $1.5 trillion as of December 2009. Most
believe that AUM will continue to rise through 2010 with some analysts predicting that industry

assets will almost double to $2.6 billion by 2013.

 Source: “The Hedge Fund of Tomorrow: Building an Enduring Firm,” Casey Quirk, April 2009. All data was obtained
from publicly available information, internally developed data and other third party sources believed to be reliable. Credit
Suisse has not sought to independently verify information obtained from public and third party sources and makes no
representations or warranties as to accuracy, completeness or reliability of such information.

Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review 
 January 2010

The Case for Hedge Funds

Historically, hedge funds have gained favor with investors for their ability to deliver positive
returns uncorrelated to those of other asset classes primarily because they are comprised of a
number of diverse strategies and irrespective of equity market movements, hedge funds can
offer attractive diversification benefits over time.
Over the long term, hedge funds have generally outperformed other broad market indices
including equity, bond, real estate and commodity benchmarks on a risk-adjusted basis
(Figure 7). Since inception of the Credit Suisse / Tremont Hedge Fund Index, hedge funds
have generated annualized returns of 9.3% with 7.8% volatility. Conversely, annualized returns
for the MSCI World Index index totaled 4.3% with significantly higher volatility (15.3%). And
while bond market volatility remains lower than that of broad hedge fund markets, returns are
lagging (6.3%). Further, on an individual fund sector basis, most hedge fund strategies have
also produced better risk-adjusted performance than those of certain indices. For instance,
the Credit Suisse Emerging Markets Hedge Fund Index, with returns of 8.0% and a volatility
of 15.6%, has outperformed the 3.9% return and 24.7% annualized volatility of the MSCI
Emerging Markets Index.
The ability of hedge funds to produce relatively stable returns on a risk-adjusted basis over the
long term suggests that hedge funds may likely remain an important part of many investors’
portfolios as they provide access to a range of investment strategies which can provide diver-
sification even in the face of significant market volatility.

Figure 7: Annualized Return Comparison (January 1994 – December 2009)

14%

Global Macro
12%
Event Driven Equity Long Short
10%
Broad Index
Multi Strategy Emerging Markets
8%
Convertible Arbitrage
Annualized Returns

S&P 500 S&P GSCI

Barclays Global Agg DJ Stoxx 50
Managed Futures
6%
Equity Market Neutral
4% MSCI World
Fixed Income Arbitrage
MSCI Emerging Markets
2%

0%

Dedicated Short
-2%
TOPIX
-4%
0% 5% 10% 15% 20% 25% 30%
Annualized Volatility

Source: Credit Suisse/Tremont Hedge Fund Index. All data was obtained from internally developed data and other third party
sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public
and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such
information. Please refer to endnotes for index definitions.

 Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review
January 2010

Conclusion:
At present, the hedge fund space appears to be a ‘buyers’ market,’ with many funds showing
an increased willingness to negotiate or lower fees. In addition, better overall liquidity combined
with a decrease in outflows will likely encourage funds to lower hurdles such as gate provisions.
Also, liquidity appears to be returning to the market sooner than originally anticipated with 58%
of all previously impaired funds having been returned to standard liquidity as of December 31,
2009.
We also expect to see further significant changes take place in the hedge fund landscape as
improved performance has resulted in a renewed focus on client retention and growth. Many
managers have reported the establishment of various incentives including improved liquidity
terms and decreased incentive fees designed to attract new investors. In addition, numer-
ous funds that were previously closed are now reopening and accepting new investments.
According to a survey performed by the Credit Suisse/Tremont Hedge Fund Index the percent-
age of closed funds in the industry dropped from 17% to 13% since November 2007. Some
of these newly opened funds are also offering more attractive terms than before, allowing
investors access to the previously unavailable return streams of some of the industry’s best
managers.
While the steps many funds have taken may be designed to reassure and attract investors, one
of the most important measures of fund viability will be the ability of hedge fund managers to
hit their high-water marks. As of 2009 year end, the majority of managers in the space were
on their way to recovery with 28% of all managers already reaching or surpassing their previous
10
peak levels and most managers believe these statistics will continue to improve.
Overall, investors have taken notice of improvements in the hedge fund space and assets under
management continue to rise. Investor sentiment surveys also suggest that many expect net
positive flows in 2010. Adding hedge fund exposure to equity-only portfolios may have the
ability to increase the efficient frontier of traditional portfolios and as many believe the rally in
equities is now at an advanced stage, an increasing number of private investors have begun to
seek the diversification from traditional asset classes such as stocks and bonds. The availabil-
ity of hedge fund exposure through retail channels has provided private investors with access
to the uncorrelated return streams of the hedge fund space while also providing an alternate
source of fund capital which previously came almost exclusively from institutional clients. For
example, according to a recent Wall Street Journal article, it is estimated that there were 26
new “hedge-fund-like” Long/Short Equity mutual funds launched in 2009 generating assets
11
of $8.7 billion through November 2009.
Emerging from one of the most significant market dislocations to date, hedge funds success-
fully capitalized on opportunities in 2009 and many were able to recoup the majority of their
losses. Many expect that as opportunities become scarcer there will likely be greater disper-
sion and decreased correlation among fund manager returns, both of which could be positive
indicators for potential investors. Overall, the ability of hedge funds to produce their highest
returns in a decade has served to bolster investor confidence and interest in the space heading
into the year ahead.

10 Previous peak index performance levels occurred in June 2008. Data based on an analysis of funds within the Index.
A high water mark is defined as the highest peak in value that a hedge fund has reached; however, it should be noted,
that high water marks will differ from investor to investor depending on their entry point into the fund. For the purposes
of this analysis, we refer to the high water mark as the highest peak in value of the overall industry or sector prior to the
financial crisis which occurred in 2008.
11 Source: Hedge Fund AQR Goes ‘Mom & Pop’, Wall Street Journal, January 6, 2010.

Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review 
 January 2010

Endnotes
The Credit Suisse/Tremont Hedge Fund Index (the “Index”) is compiled by Credit Suisse
Tremont Index LLC. It is an asset-weighted hedge fund index and includes only funds, as
opposed to separate accounts. The Index uses the Credit Suisse/Tremont database, which
track over 5,000 funds, and consists only of funds with a minimum of US$50 million under
management, a 12-month track record, and audited financial statements. It is calculated and
rebalanced on a monthly basis, and shown net of all performance fees and expenses.
MSCI World: The MSCI World Index is a free float-adjusted market capitalization weighted
index that is designed to measure the equity market performance of developed markets. As
of June 2007 the MSCI World Index consisted of the following 23 developed market country
indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece,
Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Barclays Global Aggregate Bond: A market-value-weighted index government securities, mort-
gage-backed securities, asset-backed securities and corporate securities, each with a maturity
of over one year, designed to simulate the universe of bonds in the market.
S&P 500: The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks.
The index is designed to measure performance of the broad domestic economy through chang-
es in the aggregate market value of 500 stocks representing all major industries. Investors
cannot invest directly in an index.
TOPIX: Including all First Section listed shares, TOPIX provides a comprehensive measure of
stock price changes. The Tokyo Stock Exchange domestic market is divided into two sec-
tions. The First Section is the market place for stocks of larger companies, and the Second
Section is for those of smaller and newly listed companies. Close to 1,500 companies are
listed on the First Section. TOPIX is a weighted index, the market price of each component
stock is multiplied by the number of shares listed. The index is the exclusive property of the
Tokyo Stock Exchange.
MSCI Emerging Markets Index: The index is a free float-adjusted market capitalization index
that is designed to measure equity market performance of emerging markets. As of June 2009
the MSCI Emerging Markets Index consisted of the following 22 emerging market country indi-
ces: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel,
Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan,
Thailand, and Turkey.
S&P Goldman Sachs Commodity Index: The GSCI is designed as a benchmark for investment
in the commodity markets and as a measure of commodity market performance over time.
Components of the index qualify for inclusion based on liquidity measures and are weighted in
relation to their global production levels.

10 Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review
January 2010

Important Legal Information

This material has been prepared by Credit Suisse Tremont Index LLC (“Credit Suisse”) on the basis of publicly
available information, internally developed data and other third party sources believed to be reliable. Credit
Suisse has not sought to independently verify information obtained from public and third party sources and
makes no representations or warranties as to accuracy, completeness or reliability of such information. All
opinions and views constitute judgments as of the date of writing without regard to the date on which the
reader may receive or access the information, and are subject to change at any time without notice and with
no obligation to update. This material is for informational and illustrative purposes only and is intended solely
for the information of those to whom it is distributed by Credit Suisse. No part of this material may be repro-
duced or retransmitted in any manner without the prior written permission of Credit Suisse. Credit Suisse
does not represent, warrant or guarantee that this information is suitable for any investment purpose and it
should not be used as a basis for investment decisions. PAST PERFORMANCE DOES NOT GUARANTEE
OR INDICATE FUTURE RESULTS. This material should not be viewed as a current or past recommendation
or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment
strategy. The reader should not assume that any investments in companies, securities, sectors, strategies
and/or markets identified or described herein were or will be profitable and no representation is made that
any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able
to avoid incurring substantial losses. This informational report does not constitute research and may not be
used or relied upon in connection with any offer or sale of a security or hedge fund or fund of hedge funds.
Performance differences for certain investors may occur due to various factors, including timing of investment
and eligibility to participate in new issues. Investment return will fluctuate and may be volatile, especially over
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about the future, such statements are forward looking and subject to a number of risks and uncertainties.

Investments in hedge funds are speculative and involve a high degree of risk. Hedge funds may exhibit volatil-
ity and investors may lose all or substantially all of their investment. A hedge fund manager typically controls
trading of the fund and the use of a single advisor’s trading program may result in a lack of diversification.
Hedge funds also may use leverage and trade on foreign markets, which may carry additional risks. Investments
in illiquid securities or other illiquid assets and the use of short sales, options, leverage, futures, swaps, and
other derivative instruments may create special risks and substantially increase the impact of adverse price
movements. Hedge funds typically charge higher fees than many other types of investments, which can offset
trading profits, if any. Interests in hedge funds may be subject to limitations on transferability. Hedge funds are
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an incentive for the hedge fund manager to make investments that are riskier than it would otherwise make.

The charts, tables and graphs contained in this document are not intended to be used to assist the reader
in determining which securities to buy or sell or when to buy or sell securities. Benchmarks are used
solely for purposes of comparison and the comparison does not mean that there will necessarily be a cor-
relation between the returns described herein and the benchmarks. There are limitations in using financial
indices for comparison purposes because, among other reasons, such indices may have different volatility,
diversification, credit and other material characteristics (such as number or type of instrument or security).

Copyright 2010, Credit Suisse Group AG and/or its affiliates. All rights reserved.

Contact Information
Credit Suisse Tremont Index LLC
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New York, NY 10010
United States
+1 212 538 0583
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Credit Suisse/Tremont • Hedge Funds Hit a High Note • 2009 Industry Review 11