After a miserable 2008, the world’s hedge fund industry recovered some of its poise with an average return of 1.1 per cent in January, according to Hennessee, the US investment firm that provides data on the $1.4 trillion industry.

The returns  contrast with a 8.57 per cent drop in the S&P 500 index of leading US shares while the Dow Jones Industrial Average dropped by 8.84 per cent. Bond markets fell, with the Barclays Aggregate Bond Index dropping by 0.88 per cent in the month compared with the end of December last year.

Hedge funds, which aim to deliver returns in all market conditions, are licking their wounds after suffering a fall in returns of more than 18 per cent on average last year. Only a small handful of hedge fund strategies, such as short-biased funds, made money in 2008. Many funds were hit by the spike in the cost of borrowing funds, state restrictions on short selling, and high market volatility.

The Hennessee long/short equity index advanced by 0.90 per cent in January. The Hennessee arbitrage/event driven index rose by 2.36 per cent in January. The Hennessee distressed index increased by 1.30 per cent in January.

The Hennessee merger arbitrage index advanced 0.61 per cent in January.

Last month, meanwhile, the Hennessee global/macro index rose by 0.44 per cent.