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Slow start to 2010 for hedge funds as markets tread water

HEDGE funds produced their first negative return for 10 months in January as long-only and macro strategies suffered, according to the TrimTabs/BarclayHedge database.

The California-based research company said yesterday that hedge funds lost eight basis points on average for the month after a buoyant 2009. Portfolios holding shares for the long term dropped 2.6 per cent as equity markets recorded a turbulent start to the year. Funds of hedge funds continued their rocky progress, TrimTabs said, having missed out on last year’s liquidity-driven rally. Global strategist Vincent Deluard said this was because funds of hedge funds offered weekly or monthly trading to clients, meaning they had to run a high cash buffer which reduced performance.

Deluard added: “Investors pulled cash out at the end of 2008, so funds of hedge funds increased the amount of cash and the amount of liquid assets they carried. The things that did well last year – distressed securities and emerging markets – were not the most liquid things.”

The database, which tracks around eight per cent of the hedge fund universe, recorded net outflows of $3.8bn (£2.4bn) in December.