Hedge funds decline 0.8% in January

08:17, February 11, 2010      

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Hedge funds retreated 0.8 percent in January following their best annual performance in six years, as concerns over financial regulations and the economic recovery weighed on global stock markets, Eurekahedge Pte said.

The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, posted its first monthly loss in four last month, the Singapore-based research firm said in a preliminary report on its website.

Hedge-fund returns stalled last month as the MSCI World Index dropped 4.2 percent, its biggest monthly loss since February 2009, on concern governments worldwide may step up plans to withdraw stimulus measures. Tightening monetary policy in China, instability in the Greek economy and proposed US financial reforms contributed to the decline, Eurekahedge said.

"The idea that hedge funds provide protection in turbulent markets was put to the test right out of the gate this year," said Kirby Daley, a senior strategist in Hong Kong with Newedge Group's prime brokerage business. "Investors will be the ultimate judge as to how well they performed."

Three out of seven regional indexes declined, with the measure tracking Asia ex-Japan hedge funds posting the biggest drop of 1.7 percent, the report showed.

Best returns

The retreat came after managers in Asia, excluding Japan, had their best returns on record in 2009. The Shanghai Composite Index slid 8.8 percent last month, as the Securities Times reported that some Chinese banks were ordered to recall excess loans advanced in January to meet regulatory requirements.

Regional indexes tracking North American and emerging market hedge funds fell 0.4 percent and 0.6 percent respectively in January.

The Eurekahedge European Hedge Fund Index gained 0.8 percent, its seventh straight monthly gain, while the index tracking Latin American funds added 0.3 percent, its 15th straight month of gain, the report said.

Managers who trade futures, known as commodity trading advisers or CTAs, dropped 2.8 percent, making it the worst performer among nine different indexes tracking hedge-fund strategies. The decline came as commodity prices dropped, pushing the Reuters Jefferies CRB Index, a commodities benchmark, 6.3 percent lower last month.

The index tracking so-called long-short funds, which bet on rising and falling stock prices, fell 0.8 percent, Eurekahedge said.

Eurekahedge's figures are estimates based on the 36 percent of funds that have so far disclosed performance to the researcher. The firm plans to release full data later this month.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

Source: China Daily
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