Year in review: In an eventful 2007, hedge funds show their mettle


Last year's turbulence provided plenty of opportunities for U.S. hedge funds, and overall they performed reasonably well. For 2007, the Absolute Return Composite Index gained 8.56%, with emerging markets, commodities and macro funds turning in especially strong results.

The structured finance meltdown and ensuing credit crunch set the stage for the best hedge fund trade ever - shorting subprime mortgages - a play that sent the value of John Paulson's hedge funds soaring by billions of dollars. Phil Falcone's Harbinger Capital Partners also profited mightily from this trade, as did the smaller Balestra Capital and Lahde Capital Management.