Hedge fund indexes showed double-digit returns for a majority of strategies in 2006, although most equity approaches trailed major stock indexes. Hedge fund managers returned an average of 12.99% for the year, according to the Hedge Fund Research Fund Weighted Composite index, compared with 15.8% for the S&P 500 and the 23.5% return for the MSCI EAFE. Other major hedge fund indexes reported an even bigger gap compared with stock index returns, with the Hennessee Hedge Fund index returning 11.4% for the year and the Greenwich Global Hedge Fund index, 12.2%. The Eurekahedge Hedge Fund index returned 13.6%, while its Fund of Funds index returned 9.7%. The HFRI Fund of Funds Composite index returned 10.3%.
Among equity hedge fund strategies, the best-performing class in 2006 was the HFRI Emerging Markets Asia index at 29.1%, followed by the HFRI Emerging Markets (total) index at 25.1%. Eurekahedge's North American Hedge Fund index closed 2006 at 11.4%, while its European Hedge Fund index returned 11.6%.
Hedge fund bond managers looked much better compared with the 4.3% one-year return of the Lehman Brothers Aggregate index. HFR reported all of its fixed-income hedge fund indexes beat the Lehman Aggregate, with an 8.8% return for its Fixed Income (total) index, 24.9% for the HFRI Fixed Income Convertible Bonds index and 10.3% for the High Yield index.