The Morningstar MSCI Composite Hedge Fund Index rose 1.2% in December and advanced 6.0% for the year. Nearly all Morningstar MSCI hedge fund indexes ended 2012 in positive territory.
Credit-oriented hedge fund strategies were clear winners in 2012 as investors chased rising yields and high-yield bond and leverage loan issuance reached record highs. The Morningstar MSCI Distressed Securities Hedge Fund Index soared 13.1% during the year, outpacing most other hedge fund strategies tracked by Morningstar.
Frequent equity, commodity and interest rate market reversals throughout 2012 hindered trend-following hedge funds for the second year in a row. The Morningstar MSCI Systematic Trading Hedge Fund Index sank 3.5% for the year, making it one of the few strategies to conclude 2012 in the red.