The Morningstar MSCI Composite Hedge Fund Index rose 0.5 per cent in February and 2.5 per cent in the first two months of 2013, although global macro and trend-following strategies fared less well.  

“Most hedge fund managers we track took advantage of the modest rally that continued for risky assets in February,” said Philip Guziec, alternative investing strategist at Morningstar. “However, trend-following strategies continued to struggle as global markets moved in fits and starts.”

The top three performing hedge fund strategies in February were small/mid cap, European and emerging market equities, with the MSCI Small and Mid Cap Hedge Fund Index posting an increase of 2.6 per cent.

This was despite European markets reacting to “rising concern over a worsening fiscal crisis after recent Italian elections,” Morningstar said. The firm also cited an announcement from the International Monetary Fund, which it said suggested that US government spending cuts could lower global growth. 

The MSCI Europe Index fell 2.8 per cent in February. 

However, hedge funds operating in the space - as measured by the MSCI Europe Hedge Fund Index - were able to generate a 2.2 per cent increase.

Meanwhile, as the MSCI Emerging Markets Index fell 1.3 per cent, “hedge fund managers took advantage of the dark mood" and drove a 1.1 per cent increase in the MSCI Emerging Market Hedge Fund Index, Morningstar said.

On the other hand, the worst-performing strategies for February were global macro and trend-following.

The MSCI Systematic Trading Hedge Fund Index - which represents trend-following strategies - posted a 1.6 per cent decline, while the MSCI Directional Trading Hedge Fund Index, which also includes global-macro strategies, fell 1.2 per cent for the month.