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Hedge Fund Returns Improved in January

The hedge fund industry's performance has markedly improved so far this year, despite ongoing market turbulence, according to a research group.

A hedge fund research group provided further evidence on Tuesday that the industry's performance has markedly improved so far this year, despite ongoing market turbulence.

Hedge funds returned 1.09% to investors in January, according to the Credit Suisse/Tremont Hedge Fund Index calculated by

Credit Suisse

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. Two other firms, Hedge Fund Research and Hennessee Group, also reported earlier this month that the sector ended


in the black.

The positive performance is a bright spot in a sea of bleak news for the industry, which faces redemption demands, limited financing, tougher regulation and major consolidation. Though they performed much better than the broader markets, hedge funds fell victim to the dips and peaks of the

financial crisis

last year, losing nearly 20% on average. Amid the carnage, funds lost 30% of assets under management just through the last half of 2008, forcing 1,300 to liquidate, according to Hedge Fund Research.

Even some top funds have had issues with high-profile investments, like


stakes in struggling U.S. automakers



General Motors

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, which teeter on the edge of bankruptcy, relying on government intervention to stay afloat.

Other prominent funds of



Harbinger Capital


Glenview Capital Management


Fortress Investment Group





have also suffered and been plagued by investor demands for cash.

Credit Suisse said among the best-performing strategies in January were convertible arbitrage, which capitalize on market dislocations; short-bias funds that bet against positive returns; and diversified funds with multiple strategies or broad, "global macro" exposure." Among the weakest were managed-futures funds, equity funds with long and short exposure, and those invested in emerging markets.

Oliver Schupp, president of Credit Suisse Index Co., said convertible arbitrage funds benefitted from a thawing in the credit markets, while global-macro managers were helped by high volatility.

"Overall, seven of the index's ten sectors finished the month in positive territory," noted Schupp.