Hedge funds on average chalked up returns of 20.04 per cent last year, partly reversing the loss of -19.03 per cent suffered in 2008, which was the worst performance by the sector in its history, new figures show.

The data comes from the HRFI Weighted Composite Index as produced by Hedge Fund Research, the Chicago-based firm. It shows that in December last year alone, the index gained by 1.25 per cent.

Last year’s return was the best year since 1999, when returns were 31.29 per cent, the figures revealed.

The strongest performing sector strategy in December were event driven strategies, at 3.15 per cent. Event strategy hedge funds look to exploit price movements generated by events such as corporate mergers and takeovers.