Hedge funds lost 1.42% in February according to the Barclay Hedge Fund Index compiled by BarclayHedge. The Index is now down 1.56% in 2009.
Two hedge fund indices had big gains in February Convertible Arbitrage and Equity Short Bias. The Barclay Convertible Arbitrage Index added 2.99% in February. After just two months, Convertible Arbitrage is up 9.10% in 2009. The Barclay Equity Short Bias Index jumped 4.14% in February, and is up 7.38% year-to-date.
Overall, 13 of Barclays 18 hedge fund indices lost ground in February. The Barclay Equity Long Bias Index lost 3.41%, Distressed Securities fell 2.77%, Healthcare & Biotechnology was down 2.66%, and Global Macro lost 1.98%. The Barclay Fund of Funds Index lost 0.17% in February, but is still up 0.54% in 2009.
Although equity markets in developed nations had double-digit losses in February, hedge funds performed comparatively well, says Sol Waksman, founder and president, BarclayHedge. After a very difficult year in 2008, equity-based hedge funds appear to have adapted to the current climate by delevering and improving their stock selection.
Convertible Arbitrage was one of the poorest performing sectors in 2008, losing 27.66%, says Waksman. Proprietary trading desks sold off their convertible bonds last year in order to raise cash. Now prices are cheap and the strategy has been profitable. Many equity markets have extended their 2008 selloff into the new year, providing ample opportunities for those trading the short side of the market.
L.D.