Hedge Funds Add 0.81% In Oct.

Nov 3 2011 | 10:08am ET

Hedge funds ended a brutal two-month losing streak in October, but missed out on the spectacular stock market rally.

The average hedge fund added 0.81%, Hedge Fund Research's HFRX Global Hedge Fund Index shows. That's a welcome respite from August and September, when the index fell 3.47% and 2.99%, respectively. But it came amidst an impressive turnaround for the Standard & Poor's 500 Index, which soared 11% in October, erasing its year-to-date losses.

Hedge funds have a long way to go over the next two months before they can say that. The HFRX index remains down 7.68% on the year.

Equity hedge funds, in particular, must be kicking themselves over the lost opportunity. The HFRX Equity Hedge Index rose 1.36% in October—but remains down 17.27% on the year. Fundamental value funds managed a 1.23% return, but are still off 22.84% year-to-date.

Distressed restructuring funds have the best month, adding 3.06% (down 4.98% YTD). Event-driven and special situations funds also did relatively well, rising 2.11% (down 3.43% YTD) and 2.03% (down 2.29% YTD), respectively.

Multi-strategy relative value funds rose 1.4% to become the only strategy tracked by the HFRX suite in the black year-to-date at 1.29%. Merger arbitrage funds rose 1.28% (down 1.89% YTD) and relative value arbitrage funds 1.16% (down 2.99% YTD).

Other strategies extended their losses for the year in October. Systematic diversified commodity trading advisors fell into the red with a 4.84% loss (down 3.95% YTD), while macro funds and other CTAs merely extended them, dropping 1.99% (down 4.9% YTD). Convertible arbitrage funds also lost ground, shedding 0.55% (down 2.31% YTD).

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Editor's Note

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    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…