Special situations and convertible bonds boost hedge fund performance

The Lyxor Global Hedge Fund index was up 1.3% in January, reversing its downwards trend in 2011 thanks to special situations, equity long bias and convertible bond strategies.

According to Hedge Fund Research, hedge funds recorded their second highest monthly performance in January since December 2010.

Lyxor said hedge funds benefited sharply from the improved trading environment, and many raised exposure to take advantage while it lasts.

This time last year the index was flat, and the performance of hedge funds tracked by the index went from bad to worse, ending the year down 6.59% and posting negative performance of 0.36% in December.

The top performing strategies in December were Lyxor CTA Long Term Index (1.29%), Lyxor Convertible Bonds & Volatility Arbitrage Index (1.22%) and Lyxor Distressed Securities Index (0.57%).

In January the Lyxor L/S Equity Long Bias Index rose to the top of the rankings, posting positive performance of 3%. Lyxor Convertible Bonds & Volatility Arbitrage Index continued its positive streak, up 2.17%.

The Lyxor Special Situations index emerged as a new frontrunner, finishing the month up 3.6%. Lyxor attributed these gains to specific events such as activist positions and the 11% rise in the price of gold over the month.

The weakest performance came from equity long/short funds with a short bias, finishing the month down 4.17%. The CTA short term index also posted weak performance, down 0.88%.

These returns reflect those posted by Ucits hedge funds, which also finished January in positive territory, up 1.37%, according to the Ucits Alternative Index Global.

Among Ucits hedge funds, emerging markets strategies delivered the strongest performance, up 4.04%.

CTA Ucits fared better than their non-Ucits counterparts although performance remained lacklustre, delivering 0.23% returns.

The Lyxor Global Hedge Fund index is an investable index based on Lyxor’s hedge fund platform which tracks the overall hedge fund universe.

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