Other index providers generally reported slightly positive average returns for the hedge fund industry last month.

'Global equity markets lost ground in January and volatility remained high,' says Sol Waksman, founder and president of BarclayHedge. 'Investors were whipsawed by the competing themes of optimism fuelled by the forthcoming large stimulus package versus a continuing decline in the economy.'

Overall, 11 of Barclay's 18 hedge fund indices were in positive territory in January. The Barclay Convertible Arbitrage Index jumped 5.59 per cent, Equity Short Bias Index gained 3.44 per cent, Multi-Strategy was up 2.39 per cent, Healthcare & Biotechnology gained 1.76 per cent, the Event Driven Index rose 1.17 per cent, and Technology was up 0.75 per cent.

'In a month where the S&P 500 lost 8.43 percent, hedge funds performed admirably,' says Waksman.

On the losing side, Emerging Markets fell 2.63 per cent, Equity Long Bias was down 1.12 per cent, and Pacific Rim Equities lost 0.66 per cent.

'After losing nearly 40 percent in 2008, Emerging Markets continue to face difficult economic times,' says Waksman.

'Although banks in emerging markets don't have the same high levels of exposure to toxic mortgage securities, the emerging economies are greatly impacted by declining commodity prices and reduced consumer spending in developed countries.'

The Barclay Fund of Funds Index gained 0.96 per cent in January, after suffering seven straight months of losses to end 2008.

'It appears that, on balance, funds of funds did a good job of reallocating portfolios at year-end, and managed to put in an excellent showing in January,' says Waksman.

BarclayHedge (formerly The Barclay Group) was founded in 1985 and actively tracks more than 6,000 hedge funds, funds of hedge funds, and managed futures programmes.