11/01/2012 Author: Will Wainewright

HFR figures show hedge funds were hit hard in 2011

The hedge fund sector concluded a disappointing 2011 by posting slight losses during December, meaning the industry was down almost 5% for the year, data suggests.

Hedge Fund Research’s HFRI Fund Weighted Composite Index was down 4.8% overall in 2011, the second 12-month decline in four years and the third since the firm started collecting data in 1990.  

However, the industry did recover well after slumping 6.7% during a volatile third quarter, gaining 1.3% during the final three months of the year, despite December’s 0.18% drop.

There were 12-month losses for strategies across the board, with equity hedge (8%) and macro (3.6%) funds faring badly. The only area to gain during 2011 was fixed income-based relative value, which advanced 0.55%.

“Unpredictable market dynamics created a challenging environment for hedge funds in 2011, with aggregate losses across currency, commodity, emerging markets and equity strategies related to the European currency and sovereign debt crisis,” said Ken Heinz, HFR president, in a statement.   

“Risk-off trades dominated 2011, creating challenges for convergence-oriented funds, while contributing to gains across fixed income and certain low net exposure hedged strategies.”