When hedge fund managers look back on 2011, they will not be pleased by the unflattering losses that were accumulated throughout the year. On the contrary, 2012 is different, so far. Hedge funds are doing much better with an average gain of 4.3% so far this year. According to an industry index, Eurekahedge, the first two months are the best that hedge funds have done in 12 years. Another hedge fund index, Hedge Fund Research, said that the average fund was up 5%.

These gains come after Eurekahedge said the industry average loss for 2011 was 4%. So that means, hedge funds have almost already erased 2011 losses in just two months so far. That is pretty remarkable but will hedge funds be able to continue the win streak?

Most of this hedge fund revival is due to the impressive start that stocks have had. Stocks have been rallying since the beginning of the year and they are now up 10%. The rally can be thanks in part to the improving economic conditions over in Europe and Greece specifically.

Long biased managers are doing pretty well right now. JLP Partners Fund, a fund that specializes in distressed companies, lost 23.5% last year. However, this year they have made quite a comeback and currently up 21% on the year.

Another example of the great gains of 2012, Daniel S. Loeb’s fund, Third Point, is currently up 5% this year. Loeb’s fund was one of the lucky funds of last year and was able to skid by without brutal losses.

While most hedge funds are celebrating the strong start, John Paulson is not following suit. After losing 50% last year on the Paulson Advantage Plus fund, the fund manager also reported a 1.5% loss in February. Paulson is obviously is a bit of slump right now but have no doubt, he will return.

Hedge funds are a large part of market movement. Often coined “smart money”, these hedge fund managers often have billions under management making their abilities to sway the market that much greater. That is why it is important to look around at hedge funds every once in awhile to see what kind of performance they are posting and what overall is intriguing to them. For instance, hedge funds right now are going crazy over Apple and their new product line up for this year. It is always important to see where the smart money is and where it could be going.