LONDON (The NYT) -- In mid-March, with the global stock markets plunging, Philippe Jabre, a hedge fund manager based in Geneva, started buying bombed out financial stocks in the United States, Europe and Asia.

A procession of sleepless nights followed as he wondered whether his bets would pan out, or send his nascent $2.5 billion fund outfit reeling. Now, with his main fund up 30 percent this year, rest comes a little more easily.
“For a while there, it felt as if I was the only person in Europe buying Wells Fargo,” Mr. Jabre said, as he recalled switching his main fund from a cautious 80 percent weight in bonds to his current portfolio, which was 80 percent invested in stocks.
The sharp rebound in world markets that started in mid-March has prompted many hedge fund managers to shift gears sharply, increasing risk to avoid being left behind by a market revival that took many by surprise. While a number have been caught flat-footed, many are enjoying their best gains in a long while.
For May, hedge fund returns globally were up 5.8 percent, the best monthly return in nine years, according to the Hennessee Group, an industry consultant. Here in London, the main fund of Crispin Odey, a dean of the British hedge fund community, has soared 35 percent from January through May partly because of a successful bet made on Barclays Bank this year when its shares were nearly worthless.
Even GLG Partners, the hedge fund manager based in London that was hit hard by redemptions and poor returns in 2008, has experienced a turnaround, its funds rising 11 percent for the year, in part because of its large exposure to emerging markets, which have led the global rally.
Hedge fund investors, while still net redeemers as recently as April according to research by Morgan Stanley, are gradually coming back. Their focus has been on funds like those of Mr. Jabre and Mr. Odey that have proved adept enough to position themselves for the market’s recent powerful upswing.
Mr. Jabre has apparently not been hurt by a fine from Britain’s Financial Services Authority in 2006 for £750,000, $1.4 million at the time, for taking excessive risks. Hedge fund managers caution that the return to the market has been a tentative one, driven more by institutions and less by wealthy individuals, many of whom still bear the scars of huge losses last year. Moreover, any improved spirits have been tempered by a proposed European law that would impose restrictions and costs on funds operating in London.
Still, after one of the worst six-month stretches ever experienced by the industry, the mood in the Mayfair district of London, where many fund offices are located, is decidedly more upbeat.
Last week, the leading lights of London hedge funds came together at the annual charity dinner organized by Arpad Busson, the prominent fund of funds executive who is better known as Uma Thurman’s fiancé. An estimated £15 million ($24.4 million) was raised, down from £25 million last year, but still more than expected. Guests bid for prizes like Fiat cars decorated by the artist Damien Hirst and trips to Richard Branson’s Virgin Island retreat, a reminder of the flash and glamour that prevailed during the hedge fund boom.
As for the regulatory threat from Europe, funds in London — which have benefited from the British government’s lenient regulatory approach — are up in arms about proposals that would force fund managers to seek regulatory approval for their use of leverage and any material change in investment strategy.