Barring short selling, which was down 16.90% year-on-year to December 2010, the full gamut of hedge fund strategies finished up in 2010, according to figures from the EDHEC-Risk Institute. Taking annual average return since January 2001 into consideration, short selling was about flat with only 0.30% return over the yearly average of the past decade.
Distressed Securities saw the biggest rise with a 13.8% increase in returns by year-end. Convertible arbitrage was up 12.20%, fixed income arbitrage 10.1% and CTA global and relative value each up 10% by the end of 2010. Other strategies saw positive returns as well, including long/short equity (9.90%), global macro (8.70%), merger arbitrage (6.40%), equity market neutral (5.50%) and funds of funds (5.20%).
Month-on-month returns to December were also up as optimism dominated the stock market in the last month of the year, according to EDHEC-Risk. The resolute rise of the S&P 500 index (+6.68%) followed a remarkable drop in implicit volatility (17.8%) of nearly a quarter. Over the year, the S&P 500 index grew by 15.06% to return to its level of June 2008, before the mid-2008 crash, the institute says.