BOSTON, April 9 Hedge funds posted their
strongest start to the year since 2006 but still trailed the
stock market's surge, largely because many managers began the
new year wit h a more timidly positioned por tfolio, data released
on Monday show.
The average hedge fund gained 4.94 percent during the first
three months of 2011, according to Hedge Fund Research (HFR).
The Hennessee Group reported that hedge funds gained 4.6 percent
during the quarter when the Standard & Poor's 500 index climbed
In March the HFRI Fund Weighted Composite Index of more than
2,000 f unds h ad a 0.01 percent l oss, after g aining 2.12 p ercent
in February and 2.78 percent in January, HFR said.
"Hedge funds posted their best first quarter since 2006 but
lagged equity markets as managers were conservatively
positioned," said Charles Gradante, managing principal of New
York-based industry consultants Hennessee Group.
Hedge funds, unlike mutual funds, do not disclose their
monthly or quarterly numbers to the public leaving research
companies like HFR and Hennessee to piece together industry
trends based on data collected from managers anonymously.
So after having suffered a disappointing year in 2011, many
managers were unwilling to bet that Europe had completely solved
its debt problems or that the U.S. economy would rebound
strongly, making for conservatively positioned funds, analysts
said. Indeed only a few prominent hedge fund managers reported
very strong first quarter results.
"The challenge for hedge funds is participating in the
upside of the rally without getting caught with too much
exposure if the markets have a sharp reversal," Gradante said.
Funds that bet on technology and healthcare stocks gained
6.75 percent during the quarter, but funds that bet exclusively
that stocks would fall - so called short-sellers - lost 10.25
percent, H FR data show.