By Sam Jones in London 2009-12-31

The global hedge fund industry turned in one of its best years of performance in close to a decade in 2009, according to industry data, though managers have yet to fully shake off many of the problems of 2008.

The average hedge fund returned 19 per cent to investors in 2009, according to Chicago-based data provider Hedge Fund Research. Other leading hedge fund indices report average returns of between 12 and 18 per cent, after fees.

Some of the industry’s largest funds have fared even better, delivering some of their strongest performances. Citadel, the $13bn Chicago hedge fund giant run by Ken Griffin, suffered huge losses in 2008 but has seen its flagship Kensington Global Strategies fund rebound close to 60 per cent this year.

Convertible-arbitrage funds, such as Citadel, have led the industry’s resurgence, exploiting pricing discrepancies between corporate convertible debt and equity. According to HFR, the average convertible arbitrage strategy returned more than 56 per cent in 2009.

In comparison, the average equity long/short fund returned 22.17 per cent in the year to December.

The London-based New York-listed GLG Partners, with an estimated $14bn in assets under management, has seen its equity market neutral fund return 77.8 per cent for clients so far this year.

Event-driven funds, which aim to profit from arbitrage opportunities arising from corporate announcements, also fared well, up 22.14 per cent in the year to December.

On average, only dedicated short-biased funds, which aim to profit from declines in companies’ share prices, lost money this year, down 20 per cent.