Hedge funds on average did better last year than the leading market indexes, according to Morningstar Inc., the Chicago-based investment research company.
In aggregate, the hedge funds in Morningstar's database-excluding funds-of-funds-returned 14.13%. That substantially beat the Nasdaq (9.8%), the Dow (6.44%) and the S&P 500 (3.53%).
Emerging-markets equity hedge funds topped the hedge fund charts in 2007 with a 32% annual return (in U.S. dollars). Nonetheless, that trailed the MSCI Emerging Markets Index by more than four percentage points.
With a 16% gain, global equity hedge funds were the second-best performing category, returning about nine percentage points more than its benchmark, the MSCI World Index.
No hedge fund category ended the year in the red, but convertible arbitrage hedge funds earned less than U.S. Treasury bills. The convertible arbitrage category was the worst performer with a 2.4% return for the year.
Morningstar's database comprises about 7,700 hedge funds and funds of hedge funds, grouped into 17 categories.