GLOBAL - Pension funds look set to fall tantalizingly short of enjoying their best year of investing in hedge funds since 1999, although any gains from 2009 will be welcomed after the alternative asset class suffered its worst ever losses the year before.
Late last year, the US$1.5trn hedge fund industry was widely expected to end 2009 by registering its best year for investors in a decade, when it made 31.3% in 1999, according to data providers Hedge Fund Research.
Only 2003 stood in the way - when the industry made 19.6%.
By the end of November last year hedge funds needed to add only 0.76% to the 18.8% they already made to surpass 2003.
Given somewhat indifferent performance in December, it's now not so certain the industry has surpassed its 2003 performance.
HFR's investable global hedge fund index - which is regarded as an early indicator of the data vendor's broader non-investable index, whose December number is to be announced in London on January 20 - was up 0.55% by December 31, still leaving funds 0.2% short of the 2003 returns.
The fact managers had made money in all but two of the last 20 Decembers, and suffered only one down month since March, led one London-based investor to say in November: "they'll probably beat 2003 from here."
They may not have, but their 19.4% gain last year represents quite a turnaround from 2008, when funds stumbled to a record loss of similar magnitude.
While their 19% fall in 2008 was bad by hedge fund standards, it still shielded investors from more than half the 43% loss from global shares. Last year, hedge funds undershot the 27% rise of global shares.
However, Morten Spenner, chief executive officer of $2.6bn fund of funds International Asset Management (IAM), said: "Outflows have subsided greatly, inflows have returned, and a large core set of managers demonstrated their ability to remain successful."
Andrew Gibson, IAM's head of asset allocation, added long/short credit and equities, and global macro strategies should perform well this year, although liquid, tradeable portfolios are preferred.
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