2009 was one of best years ever for global hedge funds, it is claimed

News - Funds

Monday, 04 January 2010 09:30

The year 2009 will be remembered as one of the best ever for hedge funds when managers delivered strong gains after a poor 2008 and investors returned to the fray with new money, according to research.
But the hangover from 2008, when investors around the world reacted to the industry's worst ever losses by pulling out a record $155 billion, has not fully disappeared, managers and investors said.

The $2 trillion hedge fund industry is just beginning to tally up 2009 winnings, but preliminary numbers offer plenty to cheer about. Performance trackers, including Hennessee Group and Hedge Fund Research, are expected to report 2009 data in early January.

In the first 11 months of the year, funds returned 19% on average, according to Hedge Fund Research. That compared with a loss of 19% last year.
‘It has been a very good year for many managers. From April on we saw the exact opposite of the things that made the second half of 2008 terrible.

Wherever you looked around the world, stock prices went up and bond prices went up,’ said Sol Waksman, chief executive of research firm BarclayHedge.
Strong gains prompted investors to put $150 billion into hedge funds during the first nine months of the year, Barclays Capital said. ‘We are not at new highs yet. Keep in mind how bad things really were last year,’ warned Waksman.
But some of the industry's biggest stars delivered stunningly strong returns in 2009. David Tepper's Appaloosa Management gained about 120% after fees as the manager bet that certain bank shares would recover, Reuters reported. Kenneth Griffin, long considered one of the industry's best managers, delivered gains of 62% to investors in his Citadel Investment Group's flagship Kensington and Wellington funds after large losses in 2008.

And Philip Falcone, who became known for his successful bet against the subprime market and for an activist stake in the New York Times Company, delivered a 45.15% gain in his flagship Harbinger Capital fund through to the end of November.

In particular, managers specializing in convertible arbitrage strategies fared much better. And according to HFR funds that exploit price discrepancies between corporate convertible debt and equity surged by an average 55%. As expected, 2008 winners, funds that bet exclusively on falling stock prices, suffered double digit losses. HFR reported they were down 20%.