The Morningstar MSCI Composite Hedge Fund Index rose a marginal 0.5% in February and 2.5% in the first two months of the year. The index has risen 5.4% over the past 12 months.
Most hedge fund managers we track took advantage of the modest rally that continued for risky assets in February, says Philip Guziec, alternative investing strategist at Morningstar. However, trend-following strategies continued to struggle as global markets moved in fits and starts.
Small/mid cap, European and emerging market equities were the three top-performing strategies, according to Morningstar data.
The Morningstar MSCI Small & Mid Cap Hedge Fund Index rose 2.6%. In Europe, despite ongoing political and economic uncertainty in the region, hedge funds outperformed the overall markets, with the MSCI Europe Hedge Fund Index gaining 2.2% compared to the MSCI Europe Index, which fell 2.8%. As for emerging markets, gloomy economic news on both sides of the Atlantic drove down equities, while the Morningstar MSCI Emerging Market Hedge Fund Index rose 1.1%.
The worst-performing strategies in February were global macro and trend-following; Morningstar points to rapid trend reversals driving the 1.6% decline on the MSCI Systematic Trading Hedge Fund Index. The MSCI Directional Trading Hedge Fund Index, which includes global-macro strategies, fell 1.2% for the month.
Single-manager funds in Morningstars hedge fund database, which tracks 11,000 hedge funds and funds of hedge funds, had inflows of $3.3 billion in January, the first month of inflows after four months of outflows.
(CG)