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Hedge Funds Gained Ground In October
The industry broadly advanced in October, helped by better performance of global equities and shifting interest rate sentiment from which these entities can benefit.
A global measure of hedge fund returns showed that the sector advanced in October, helped by some recent equities' losses being reversed and a rise in short-term interest rates.
The investible HFRI 500 Fund Weighted Composite Index advanced 1.7 per cent in October, while the HFRI Fund Weighted Composite Index® (FWC) added 1.6 per cent, according to data released today by the Chicago-based group, Hedge Fund Research. With the October gain, total capital invested in the global hedge fund industry rose to an estimated $4.04 trillion.
The performance spread of the underlying index constituents narrowed slightly in October, as the top decile of the HFRI gained an average of 8.0 per cent, while the bottom decile fell by an average of -4.8 per cent for the month.
Equity hedge funds, which invest long and short across specialized sub-strategies, led all main strategy performance in October. The investible HFRI 500 Equity Hedge Index gained 2.2 per cent for the month, increasing its year-to-date returns to 11.9 per cent.
Event-driven strategies, which often focus on unloved, deep value equity exposures and speculation on merger and acquisitions, also posted strong gains in October. The investible HFRI 500 Event-Driven Index advanced 1.9 per cent, while the HFRI Event-Driven (Total) Index added 1.3 per cent for the month.
Uncorrelated macro strategies also advanced in October, as short terms rates increased while longer terms rates fell, and energy prices extended recent gains. The investible HFRI 500 Macro Index returned 1.4 per cent, while the HFRI Macro (Total) Index added 1.3 per cent.
Fixed income-based, interest rate-sensitive strategies also gained for the month, as the yield curve flattened and as investors positioned for the near-term tapering on bond purchases by the US Federal Reserve.
The investible HFRI 500 Relative Value Index also advanced 0.8 per cent for the month, while the HFRI Relative Value (Total) Index gained 0.7 per cent.
