Hedge funds gained 1.31% in April according to the Barclay Hedge Fund Index compiled by BarclayHedge. The Index has gained 4.58% in the first four months of 2010.

"Rising fears of default in the Euro zone were a negative for European equity markets," says Sol Waksman, founder and president of BarclayHedge.

In contrast to hedge funds trading in other equity markets, the Barclay European Equities Index was up just 0.05% in April.

"On the other hand, increasing political risk for US financial institutions in the face of SEC fraud charges brought against Goldman Sachs did little to impede the ongoing rally in US equities driven by improving economic statistics," says Waksman.

All but one of Barclay's 18 hedge fund indices gained ground in April. The Distressed Securities Index jumped 2.88%, Convertible Arbitrage gained 2.32%, Equity Long Bias, was up 2.04%, the Event Driven Index rose 1.62%, and Fixed Income Arbitrage was up 1.65%.

The Barclay Distressed Securities Index has gained 9.52% in the first four months of 2010.

"As investors have become more aggressive in their search for yield, prices for high yield bonds have continued to increase at a faster rate than investment grade bonds," says Waksman. "It's been an excellent environment for buyers of distressed securities."

The Equity Short Bias Index lost 5.87% in April. After a 2.55% gain in January, the Index has plummeted during the past three months, and is now down 11.20% in 2010.

"While most hedge fund strategies have been profitable over the past three months, short sellers have been punished by broadly rising equity markets," says Waksman.

The Barclay Fund of Funds Index gained 0.95% in April, and is up 2.40% year-to-date.