Relief for Hedge Funds in January -- Page 2
Improved liquidity conditions help hedge funds.
Fund Times
Increased liquidity also prompted a surge in January U.S. merger and acquisition volume, even though the number of announced deals dwindled. Funds in the Morningstar Corporate Actions Hedge Fund Index, which aim to profit from such deals, rose 0.7%.
News of high unemployment and economic contraction battered U.S. and European stocks, but the Morningstar US Equity Hedge Fund Index ended the month up 0.4%. The currency-hedged Morningstar with MSCI Europe Hedge Fund Index also rose 0.5% while the Morningstar Europe Equity Hedge Fund Index declined 3.7%. Some European hedge funds made local currency gains, but the U.S. dollar appreciated against the euro.
Emerging markets also suffered, as investors fled from Eastern European and Russian stocks, although Latin American stocks held steady. The Morningstar with MSCI Emerging Market Hedge Fund Index dropped 0.4% in January.
The rise in the U.S. dollar created profits for some price-trend-following and global-macro non-trend funds in January, but volatility across equity, government bond, and commodity markets throughout the month led to trading losses. The Morningstar Global Non-Trend Hedge Fund Index rose 0.1% while the Morningstar Global Trend Hedge Fund Index declined 1.6%.
Investors continued to pull out of hedge funds, withdrawing $26 billion in December 2008 and $70 billion for the year. Europe- and U.S.-equity hedge funds saw the largest redemptions, losing $14.8 and $18.3 billion respectively in 2008.
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| Estimated Net Flow Data for December and Full Year 2008 | ||||
 | | | | |
| By Category | Dec. 2008 Flows | 2008 Annual Flows | ||
| ||||
| Convertible Arbitrage | -270 | -1,742 | ||
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| Corporate Actions | -669 | -3,451 | ||
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| Debt Arbitrage | -1,102 | -2,911 | ||
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| Distressed Securities | -1,072 | 2,249 | ||
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| Dvlp Asia Equity | -707 | -5,406 | ||
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| Emerging Markets Equity | -1,597 | -4,953 | ||
| ||||
| Equity Arbitrage | -1536 | -5,338 | ||
| ||||
| Europe Equity | -2859 | -14,840 | ||
| ||||
| Global Debt | -949 | -6,476 | ||
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| Global Equity | -1,102 | -2,742 | ||
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| Global Non Trend | -3,400 | -3,754 | ||
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| Global Trend | -1,767 | 2,597 | ||
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| Multistrategy | -3,479 | -4,355 | ||
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| Short Equity | -16 | -144 | ||
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| US Equity | -5,096 | -18,302 | ||
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| US Small Cap Eqty | -416 | -642 | ||
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| Estimated Total Net Flow | 26,036 | 70,210 | ||
 | ||||
| By Rating | ||||
| ||||
| 5-Star | -5,575 | 573 | ||
| ||||
| 4-Star | -5,134 | -6,156 | ||
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| 3-Star | -9,413 | -40,943 | ||
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| 2-Star | -3,412 | -22,665 | ||
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| 1-Star | -295 | -6,105 | ||
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| Not Rated | -2,208 | 5,085 | ||
| Estimated Total Net Flow | -26,036 | -70,210 | ||
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| December asset flows for the Morningstar Hedge Fund Indexes are based on funds that reported as of Jan. 31, 2009. |