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25 Feb 2009

Hedge Funds Hold Up in January

Morningstar reported a summary of hedge fund performance for January 2009 as well as asset flows for 2008. As stocks and government bonds got clobbered in January, hedge funds held up relatively well, the report said.

The Morningstar 1000 Hedge Fund Index declined only 1.2% and the currency-hedged Morningstar with MSCI Hedge Fund Composite Asset-Weighted Index rose 1.2%, against the MSCI World Index's 8.9% drop and the BarCap Global Aggregate Index's 3.3% decline.

"Some liquidity returned to the credit markets in January, helping certain hedge fund strategies, but even hedge funds trading equities persevered through January's tough markets," said Morningstar Hedge Fund Analyst Nadia Papagiannis. "Overall, hedge funds held their own in January."

The rise in the U.S. dollar created profits for some price-trend-following and global-macro non-trend funds in January, but volatility across equity, government bond, and commodity markets throughout the month led to trading losses. The Morningstar Global Non-Trend Hedge Fund Index rose 0.1% while the Morningstar Global Trend Hedge Fund Index declined 1.6%.

Investors continued to pull out of hedge funds, withdrawing $26 billion in December and $70 billion for the year. Europe- and U.S.-equity hedge funds saw the largest redemptions, losing $14.8 and $18.3 billion respectively in 2008.

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