Hedge funds lost 1.42 per cent in February according to the Barclay Hedge Fund Index compiled by BarclayHedge.

The index is now down 1.56 per cent in 2009.

Hedge funds lost 1.42 per cent in February according to the Barclay Hedge Fund Index compiled by BarclayHedge.

The index is now down 1.56 per cent in 2009.

'Although equity markets in developed nations had double-digit losses in February, hedge funds performed comparatively well,' says Sol Waksman, founder and president of  BarclayHedge. 'After a very difficult year in 2008, equity-based hedge funds appear to have adapted to the current climate by delevering and improving their stock selection.'

Two hedge fund indices had big gains in February - convertible arbitrage and equity short bias. The Barclay Convertible Arbitrage Index added 2.99 per cent in February. After just two months, it is up 9.10 per cent in 2009.

'Convertible Arbitrage was one of the poorest performing sectors in 2008, losing 27.66 per cent,' says Waksman. 'Proprietary trading desks sold off their convertible bonds last year in order to raise cash. Now prices are cheap and the strategy has been profitable.'

The Barclay Equity Short Bias Index jumped 4.14 per cent in February, and is up 7.38 per cent year-to-date.

'Many equity markets have extended their 2008 selloff into the new year, providing ample opportunities for those trading the short side of the market,' says Waksman. 

Overall, 13 of Barclay's 18 hedge fund indices lost ground in February. The Barclay Equity Long Bias Index lost 3.41 per cent, Distressed Securities fell 2.77 per cent, Healthcare & Biotechnology was down 2.66 per cent, and Global Macro lost 1.98 per cent. 

The Barclay Fund of Funds Index lost 0.17 per cent in February, but is still up 0.54 per cent in 2009.