Index Has Hedge Funds Up 1.85% In Oct.

Nov 4 2011 | 11:37am ET

Hedge funds bounced back last month with most posting positive returns. But they still have a ways to go if they're to end 2011 in anything but the red.

The average fund rose 1.85% in October, the Dow Jones Credit Suisse Core Hedge Fund Index shows. But after a rough August and September—the benchmark fell more than 4% in the latter month—the index remains down 6.13% on the year, with just two months to go.

Long/short equity hedge funds had the best month, rising 5.27% to cut their average year-to-date loss to 4.37%. Event-driven funds also did well, adding 2.66%, but they remain down an average of 11.01%. By contrast, managed futures funds had the worst October, dropping 5.07%, leaving the strategy down 5.18% on the year.

"Event-driven was the highest performing sector last month as many managers restructured their portfolios to reduce exposure to softer 'catalyst' situations, such as management changes and litigations. These situations were drivers of underperformance in September," Oliver Schupp, president of the Credit Suisse Index Co., said. "Meanwhile, managed futures, the best performing strategy in September, was the worst performer in October as trends reversed against many short equities, short commodities and long fixed-income positions."

Only one other strategy suffered a loss in October: convertible arbitrage, which lost 0.52% (down 6.63% YTD). And only one is in the black for the year—and just barely: fixed-income arbitrage, which rose 0.18% last month and is up a microscopic 0.01% on the year.

Global macro funds added 1.84% in October (down 9.14% YTD) and emerging markets funds 1.73% (down 1.15% YTD).

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