Most major equity markets rallied in February, driving the Morningstar 1000 Hedge Fund Index up 0.3%. The Morningstar MSCI Hedge Fund Index eked out small returns as well, up 0.7%.

But large swings in risk aversion and a myriad of mixed signals from the economy made investors wary last month — and created problems for hedge fund strategies, said Nadia Papagiannis, an alternative investment strategist at Morningstar [MORN].

That confusion was apparent in the performance of Morningstar’s Global Trend and Global Non-Trend Hedge Fund Indexes, which rose 0.1% and 0.3%, respectively. Both of these funds trade derivatives in stocks, bonds, commodities and currency markets. While some funds in the indexes found opportunity in U.S. Treasury bonds and the U.S. dollar in relation to the Euro, others were hindered by the turn-around in the global and oil markets, according to Morningstar.

The most notable outlier to the upward global trajectory in major markets was Europe, which suffered from international concerns about the strength of the Euro and the financial stability of Greece. The Morningstar Europe Equity Hedge Fund Index, for example, was down 1.6% for the month, mostly in line with the MSCI Europe NR Stock Index, which declined 2.0%.

Emerging markets and Japan also struggled last month, thanks to the inevitable tightening of monetary policy that occurred in China, after fears over inflation in the communist country exacerbated. Both the Morningstar MSCI Emerging Markets and the Morningstar MSCI Japan Hedge Fund Indexes were down 0.7%. However, increased mergers and acquisitions activity in Asia drove the Morningstar Corporate Action Hedge Fund Index was surprisingly up nearly 2.0%, according to Morningstar.

In January, Morningstar’s hedge funds overall saw $2 billion in outflows, marking the second consecutive months investors pulled money from the funds. Hedge funds, known for their lack of transparency and high fees, used to justify these barriers with above-market rates. Now, with smaller returns in a transparency-focused environment, industry analysts indicate that investors may be finding this increasingly difficult.