After strong start to year, hedge funds fall in April

NEW YORK Mon May 7, 2012 3:40pm EDT

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NEW YORK (Reuters) - Hedge funds lost some ground in April, after the industry stormed into 2012 with the best first-quarter of performance since 2006.

The HFRI Fund Weighted Composite Index fell 0.36 percent last month, according to data released Monday by Hedge Fund Research, which tracks industry performance and flows.

Still, hedge funds narrowly beat the Standard & Poor's 500 index in April, which fell 0.8 percent.

After equity and credit markets rallied in the first few months of the year, concerns about the health of the U.S. economy and about prolonged economic tumult in the euro zone pushed financial markets lower at the beginning of the second quarter.

Equity hedge funds lost 0.57 percent in April. Macro-focused funds also lost ground, falling 0.35 percent. Relative Value Arbitrage funds had a better month, but only slightly. Those funds edged up 0.21 percent last month.

April's slim losses follow a quarter in which hedge funds on average climbed 4.79 percent.

Those solid returns came as a relief to many money managers and their investors, who struggled through whipsawing markets and poor fund performance for much of 2011, when hedge funds on average sank 5 percent.

"April hedge fund performance marked a transition from the equity beta driven gains in the first quarter to an environment more similar to the risk-averse environment which dominated 2011," said Kenneth J. Heinz, President of HFR.

(Reporting by Katya Wachtel; editing by M.D. Golan)

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