Last year's hedge fund losers may be turning into winners again.

Several of the largest hedge funds that ended last year deep in the red, jumped to good starts in January, giving their wealthy investors reason to believe savvy traders are getting back their magic touch.

Lee Ainslie's Maverick Capital staged a dramatic rebound, leaping onto the list of top-20 performing funds in January thanks to a 5.89 percent gain in the first weeks of the year. In 2011, he lost 15 percent.

Even John Paulson shared good news with investors when he announced that his Advantage Plus Fund rose 5 percent last month after having been touted as the industry's biggest loser in 2011 with a 52 percent loss. By comparison, the benchmark S&P 500 index rose 4.4 percent in January.

But most prominently, the relatively small Henderson European Absolute Return fund, with about $116 million in assets, currently claims top honors as the year's most profitable fund with a 14 percent gain through late January, HSBC data show.

Last year that fund, known for its manager's contrarian stock picks, ranked second highest on the list of the year's biggest losers with a 42 percent decline.

Fortress Investment Group , one of a handful of publicly traded asset managers, also started 2012 with solid gains after several of its portfolios struggled in 2011.

Its Fortress Macro Fund rose 3.82 percent through January, while the Fortress Asia Macro Fund gained 2.21 percent, according to an SEC regulatory filing Monday. The firm's commodities fund dipped slightly, down 0.43 percent.

One month clearly does not make a year, but for last year's big losers, the January rebound could be a sign their fortunes are changing because the stock markets are doing better and they have made adjustments to their portfolios, investors said.

In fact, much of the $2 trillion hedge fund industry is looking for a revival this year, after funds, on average, posted a 5 percent decline in 2011.

January can be characterized as having been generally strong across the board, said Paul Zummo, co-head and chief investment officer at JP Morgan Alternative Asset Management.

Similarly, Dan Loeb's Third Point Ultra fund is on the list of winners with a 5.8 percent gain in January after having dipped 2.3 percent last year, and David Tepper who finished 2011 down in the low single digits, turned the corner with a gain in the low single digits in January, people familiar with their numbers said.

While welcome, January's turnaround does not come as much of a surprise for the hedge fund industry considering the stock market's strong start to the year, investors and managers said.

So-called long-short equity funds turned in some of the industry's best returns, with an increase of 2.62 percent in January, analysts at Bank of America Merrill Lynch found. Last year, these types of funds which invest more than a trillion dollars in the stock market, lost about 19 percent.

Adjusting positions helped. After many hedge funds stumbled last year from too many managers chasing the same opportunities, crowding into big stocks like Bank of America, the appetite has shifted this year to small cap stocks, Merrill Lynch analysts said. But at the same time, Bank of America is up 35 percent amid slightly better economic numbers and hopes that Europe's financial crisis can be sorted out.

Hedge fund managers tend to do better in environments that are not as driven by macroeconomic and politically driven fundamentals, JP Morgan's Zummo said.

Last year's winners are also benefitting from more favorable conditions. Steven A. Cohen's SAC Capital Advisors gained about 2 percent in January after rising 8 percent last year, and Kenneth Griffin's flagship funds at Citadel, climbed 3 percent in January after a 20 percent increase last year.

Not everyone has called an all-clear on the troubles that wrecked last year's returns.

It is no time to put on our party hats, said one executive at a mid-sized hedge fund who can not be quoted publicly and worried that Greece's debt problems will still make investing tough because many fund managers are exposed to European banks who are in turn exposed to Greece.

(Reporting By Svea Herbst-Bayliss; Additional reporting by Katya Wachtel; Editing by Bernard Orr)