Hedge funds produced their best return in a decade — 11.6% — in the year ended Dec. 31 judged by the HFRI Fund Weighted Composite index managed by Hedge Fund Research.
In a report released Friday, HFR researchers said the index returned 10.5% in the prior year.
Returns of the HFRI Asset Weighted Composite index were 2.8% as of Dec. 31 and 7.6% as of the same date a year earlier.
HFR researchers said in its report that "the full-year 2020 gain for the HFRI Fund Weighted Composite index marks an impressive recovery from the 11.6% decline (in the first quarter) as the global coronavirus pandemic and resulting lockdowns were in the early stages."
By strategy, the HFRI Equity Hedge (Total) index produced the highest return for the year ended Dec. 31 at 17.5%, followed by the HFRI Event-Driven (Total) index, 9.3%; the HFRI Macro (Total) index, 5.2%; and the HFRI Relative Value (Total) index, 3.3%.
"Hedge funds effectively navigated both December and calendar-year 2020 volatility and accelerated into 2021 with powerful, broad-based performance, HFR President Kenneth J. Hines said in a statement accompanying the report.
"With the strong performance, hedge funds are continuing to evolve with the shifting geopolitical risk and macroeconomic opportunity set," he said, adding that "leading institutions are likely to continue expanding allocations to hedge funds as a preferred portfolio mechanism to opportunistically participate in these dynamic trends, while mitigating inherent risks with specialized, tactical long-short exposures."
