Hedge funds have best year since 1999

Hedge fund industry performance in 2009 was the best in a decade, according to Hedge Fund Research. The HFRI Fund Weighted Composite index returned 20.04% for the year ended Dec. 31, the industry's highest since the 31.29% return of the index in 1999. Nine months of strong markets in 2009 engineered a near reversal of fortune for hedge funds, compared with 2008's abysmal absolute performance as evidenced by the 19.03% fall of the HFRI Fund Weighted Composite index. Index provider Hennessee Group also reported a strong 2009 return – 24.6% — for the Hennessee Hedge Fund index. Both hedge fund indexes were buoyed by 2009's substantial equity rally, but trailed the calendar year returns of 26.5% for the S&P 500 index and 35.14% for the MSCI World index. By contrast, the Barclays Capital Aggregate Bond index returned 5.93% for the 12 months ended Dec. 31. Collective performance of hedge funds of funds last year trailed that of single manager hedge funds by nearly 900 basis points. The HFRI Funds of Funds Composite index returned 11.16% for the year ended Dec. 31, which while lower than that of the hedge fund composite index still a marked improvement on the 2008 return of -21.37%. Ms. Williamson is a reporter at Pensions & Investments, a sister publication to InvestmentNews.