Hedge funds leapfrog over mortgage woes

Despite being caught in the 2007 credit crunch, hedge funds gained 14.13% for the year according to Morningstar Inc. Hedge funds would have showed even better performance if not for the months of August and November when the mortgage crisis reached its highest levels, according to Morningstar hedge fund analyst Nadia Van Dalen. The report said emerging-markets equity hedge funds had a 32% annual return with the MSCI Emerging Markets Index outperforming the average hedge fund by 4% in 2007. Global equity hedge funds had a 9% better benchmark return for the year, outperforming the MSCI World Index. U.S. hedge funds fared well for the year with the U.S. equity category surpassing the S&P 500 Index for the fourth quarter and the year as a whole and the U.S equity small-cap category showing 13.6% gain in 2007. The Europe equity category returned 14.1% for 2007 and the developed Asia equity category ended the year with a 6.2% return. Morningstar, a Chicago-based independent investment research firm, contains roughly 7,700 hedge funds and funds of hedge funds grouped into 17 categories in its database.