Hedge funds climbed 0.9 percent last month, posting their best gain since September while trailing global equities, as markets rallied in the wake of a U.S. budget agreement and correlation between stocks diminished.
Steven A. Cohen, John Paulson, Boaz Weinstein and John Burbank posted advances. Long-short and multistrategy managers rose and macro funds declined.
The MSCI All-Country World Index, which has beaten the $2.25 trillion hedge-fund industry in five of the past seven years, returned 4.6 percent in January with dividends. The market’s biggest gains came on Jan. 2, when the Standard & Poor’s 500 Index jumped the most in more than a year as U.S. lawmakers passed a bill averting more than $600 billion in spending cuts and tax increases threatening a recovery in the world’s biggest economy.
“January was a very positive month for the hedge-fund industry,” said Don Steinbrugge, managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors. “It was primarily driven by the passing of a budget agreement that averted a fiscal cliff, which would have significantly increased the probability of a recession. This fueled a relief rally in the equity markets and also gave fixed- income investors confidence.”
The Bloomberg Hedge Funds Aggregate Index is down 8.3 percent from its July 2007 peak. The main Bloomberg hedge fund index is weighted by market capitalization and tracks 2,764 funds, 1,287 of which have reported returns for January. The index, with annual data dating to 2006, has fallen short of the MSCI benchmark each year except for 2008 and 2011.
Bullish Views
Managers from David Tepper to Ray Dalio have started 2013 expressing bullish sentiment about U.S. stocks and global economies.
Tepper, who runs the $15 billion Appaloosa Management LP, said last month he’s bullish on U.S. stocks as the economy is set to grow by as much as 3 percent this year. Investors should own stocks because they’re historically inexpensive, U.S. companies have little debt, interest rates are low, credit is fully valued and the major risks to the global economy, such as the debt crisis in Europe, have diminished, he said in a Jan.22 interview on Bloomberg Television.
Dalio, founder of Bridgewater Associates LP, the world’s biggest hedge fund, said 2013 will be a “game changer” for the economy as investors reallocate money after risks such as Europe’s sovereign-debt crisis receded.
“There’s a lot of money in a place that’s getting a very bad return and in this particular year there’s going to be, in my opinion, a shift,” Dalio, whose firm oversaw $81.3 billion in hedge-fund assets as of Oct. 31, said last month at the World Economic Forum in Davos, Switzerland. “The complexion of the world will change as that money goes from cash into other things.”