New York (HedgeCo.net) – 2011 was the second worst year on record for the hedge fund industry as global markets remained unpredictable amid the European debt crisis, risk-on risk-off investor sentiment, political wrangling and geopolitical events. The Eurekahedge Hedge Fund Index was flat to slightly negative in December, bringing the yearly number to -4.1%. The MSCI World Index returned -0.4% in December and was down 9.9% for year 2011.
Other hedge fund highlights for 2011 include:
- Total asset flows for the year were US$67 billion taking the size of the overall industry to US$1.72 trillion.
- Launch activity remained strong throughout 2011, with more than 1100 hedge funds launching in the year (the second highest number of launches ever). Capital raising remained as challenging as ever.
- Latin American hedge funds provided the best returns for 2011, gaining 2% over the year. The second best performing region was North American hedge funds, even though it was in negative territory for the year, with a drop of 0.8%.
- The Mizuho-Eurekahedge Index, which is an asset-weighted index, finished the year with gains of 2%, thus showing that overall larger funds fared better in the market.
- Fixed income and arbitrage were the best performing strategies for the year – up 1.5% and 0.6% respectively.
While most hedge funds witnessed gains through the first six months of 2011, the heightened volatility in worldwide markets during the second half of the year pushed many hedge funds into the red. Larger funds fared better than their smaller counterparts during the year, as evidenced by the Mizuho-Eurekahedge Top-100 Index gaining 2% over 2011.
Editing by Alex Akesson