Emerging markets hedge funds on top in February

Emerging markets hedge funds outperformed every other hedge fund strategy in February bringing year to date performance to 7.4%, the strongest returns posted by any of the 13 strategies tracked by Edhec Risk-Alternative Indexes.

In February emerging market hedge funds were up 3.3%. This is a complete turnaround from 2011 when emerging markets hedge funds were down 10.8%, the weakest performance among all 13 hedge fund strategies.

Equity focused strategies exhibited returns broadly consistent with market dynamics (long/short equity 2.63%; equity market neutral 0.84%; event driven 1.76%).

According to Edhec Risk, the event driven strategy performed in line with its modelled dynamic exposure while the other two showed significant alpha.

The only strategy to post negative performance in February was short selling, down 5.59%. Edhec noted the strategy exhibited negative alpha relative to the stock market.

The convertible arbitrage strategy recorded a 2.03% gain due to its exposure to strong fixed-income factors. The distressed securities strategy, with an increased short-term sensitivity to credit risk, returned 1.95%.

The global commodity trading advisor (CTA) strategy was positive for a fourth consecutive month, returning 0.93%.

With most strategies having benefited from market conditions, funds of hedge funds returned 1.46%, confirming a robust start for the year 2012 (up 3% year to date).

Overall hedge funds monitored by the Edhec-Risk Alternative Indexes are up 2.58% year to date.

Edhec’s data tallies with that provided by Lyxor Research, another French company. Lyxor Research recently put out a statement claiming hedge funds will be less correlated to markets in 2012 and deliver better performance than last year due to a normalizing trading environment.

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