Hedge Funds post gains for October

08 Nov, 2010

Hedge funds enjoyed strong gains through October with the HFRI Fund Weighted Composite Index rising 2.35%. There were broad based gains and positive contributions from all of the main strategy areas.

Equity markets continued to grow buoyed on by improving prospects for global economic growth. Credit markets remained strong and short-dated fixed income rose following the second bout of quantitative easing (QE2) by the US Federal Reserve.

Macro strategies had the best monthly performance with the HFRI Macro (Total) Index posting gains of 2.70%. Commodity and metals exposure had the most positive influence on macro performance contributing to gains across all macro sub-strategies – currency exposure also had a strong positive contribution.

Systematic strategies outperformed discretionary macro – although both posted gains for the month with the HFRI Macro: Systematic Diversified Index gaining 3.62% in October.

Equity hedge funds also posted strong gains for the month with the HFRI Equity Hedge (Total) Index increasing 2.47%. Exposure to equities in energy/basic materials and quantitative directional strategies saw increases of 5.22% and 3.62% respectively. Increases were also recorded across fundamental growth, value, technology/healthcare and equity market neutral with only short bias detracting from the index performance with a loss of 2.13%.

The HFRI Event Driven Index posted a gain of 1.70%, with positive contributions from activist and credit arbitrage sub-strategies. All event driven sub-strategies recorded gains in October as financial market liquidity remained strong and risk tolerance returned to investors.

The HFRI Relative Value Index went up 1.65% and continued to lead all main strategies for 2010 with a Year-To-Date (YTD) gain of 9.82%. Prospects for additional fixed income purchases by the US Federal Open Markets Committee as well as strength in energy and commodity sectors both contributed to gains for the month. Yield Alternatives, which includes energy infrastructure investments, posted a gain of 2.21% for the month, while both convertible arbitrage and relative value: multi-strategy funds also saw increases for the month.

Fund of hedge funds had a good month with the HFRI Fund of Hedge Funds Index rising 1.49%, while the HFRI Emerging Markets Index gained 2.51% with the strongest regional contribution coming from Emerging Asia.