Speaking to the Financial Times, Liongate chief investment officer Randall Dillard admitted that the sector had endured something of a difficult spell in 2011, but insisted there will be opportunities to capitalise on this year.
"2011 will be a good year for hedge funds, whereas last year was really not," he told the newspaper. "Market volatility will probably persist, but the kind of volatility that hedge funds saw in May and June in 2010 will dissipate."
Figures compiled by Hedge Fund Research revealed that hedge funds returned an average of seven per cent up to the end of November 2010, while equity long/short managers struggled to a median of 6.7 per cent.
Funds have also been hit by the introduction of new financial regulations introduced as a response to the recession, including the controversial Basel III legislation.
By Asim Shah