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Hedge Funds Start Year Fast on Strength of February’s 2.5% Return

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Equity strategies led hedge funds to a robust 2.5% return in February, the best monthly performance in two years for the Preqin All-Strategies Hedge Fund benchmark.

Equity strategies returned 3.3%, following a small loss in January, alternatives data provider Preqin reported Tuesday.

Activist and event-driven hedge funds also did well in February, up 3.2% and 3.1%.

Credit strategies, which have posted only two losing months since July 2013, continued their winning streak, up 1.6%.  

In contrast, commodity trading advisors, which led the benchmark in January with a 3.1% return, barely saved face in February with a 0.2% return. Plummeting oil prices led to CTAs’ weakest monthly performance since October, Preqin reported.

Funds of funds generated a 1.7% return in February, their fourth positive monthly return in a row, and are up 4.8%over 12 months.

The Preqin benchmark is now up 2.5% for the year (January was flat), which should hearten investors whose chief concern coming into the new year was performance. The average hedge fund manager returned a lackluster 3.8% for all of 2014.

“Despite investors typically allocating to hedge funds for risk-adjusted returns over longer time frames, this short-term return to form, the highest in over two years, will go some way in allaying investor concerns,” Preqin’s head of hedge fund products, Amy Bensted, said in a statement.

“Fund managers will now have the tricky task of continuing to capitalize on current macro opportunities to deliver the better performance promised in 2015, in order to prove the true value of hedge funds within a diversified portfolio.”

Bensted said that after several high-profile institutional exits from hedge fund investment in 2015, the value of hedge funds within institutional portfolios is being increasingly scrutinized.

— Check out Hedge Funds Meet Expectations Despite ‘Underwhelming’ Returns: Preqin on ThinkAdvisor.