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Hedge Funds January 2012 Performance

Hedge Funds January Performance

January Consensus: Hedge Funds Made Gains, Less than S&P

While hedge fund performance estimates for last month range anywhere from 1.3% to 2.6%, it's clear that hedge funds made gains last month.  Another finding is that hedge funds on average trailed the S&P, failing to catch the big rally in January when Standard and Poor's added 4.48%.  Still, there is reason to be excited about even a 2.63% gain as that would mark the second-best single month performance since December 2010.
Hedge funds started the year on the right foot, with a 2.63% gain in January, according to Chicago-based Hedge Fund Research.

The gain, the second-highest monthly return since December 2010, was, however, below the Standard & Poor's 500's 4.48% increase last month, taking into account dividend payouts and signaling that some fund managers didn't benefit from January's market rally.

Alan Zafran, a partner with Luminous Capital, which oversees $4.7 billion in client assets, said managers are "still afraid to take risk and haven't got enough net long positions."

Hedge fund managers' hesitation to dive back into markets and risky assets is understandable. After all, they were whipsawed for the most part of last year, with sharp market plunges causing much losses and the ensued conservatism leading many managers to miss out on rallies. The industry posted an average 5.16% decline, with some seasoned managers like John Paulson's Paulson & Co. shedding 52% in one of his main funds and Bill Ackman's Pershing Square Capital Management LP losing between 1.1% and 2%. Source

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