Hedge Funds Slip 0.5% In October

Nov 8 2012 | 8:37am ET

Hedge funds posted their first decline in five months in October, according to the HFRI Fund Weighted Composite Index, which slipped 0.5%.

October's biggest losers were systematic diversified funds, down 3.47%  (and down 3.46% year to date); Other red ink-generating strategies included macro funds, down 2.19% on the month (and 1.33% YTD); equity hedge energy/basic materials funds, down 1.76% on the month (and 4.48% YTD); quantitative directional, down 0.97% (but up 6.28% year to date); relative value fixed-income convertible arbitrage, down 0.60% (but up 5.98% YTD); and merger arbitrage, down 0.46% on the month (up 1.21% YTD).

Equity hedge short bias funds actually had a posiitve month, up 0.96%, but remain down 12.68% YTD (the worst YTD performance of all the strategies tracked by Hedge Fund Research).

Other winning strategies in October included RV fixed-income asset-backed, up 1.27% (and up 14.37% YTD); RV fixed-income corporate index, up 0.80% (and 8.89% YTD); and event-driven distressed/restructuring, up 0.75% (and 6.77% YTD).

All HFR's regional indexes were in the red in October with the exception of Russia/Eastern Europe funds, which were down 1.06% on the month (up 1.97% YTD).

“Hedge fund performance in October reflected a definitive shift in investor sentiment from the beta-driven optimism over steady improvements in stagnant global economies to the realities, risk and uncertainly inherent in additional European banking stabilization measures, US elections and the pending fiscal cliff,” said Kenneth J. Heinz, president of HFR, in a statement.

“Fundamentally based arbitrage, event and equity strategies demonstrated effective hedging against and tactical adjustment to these dynamic changes, while trend following, quantitative macro strategies experienced weakness as a result of them. Under the expectations of elevated financial volatility through year end, hedge funds which have effectively demonstrated their ability to navigate this environment will continue to attract institutionalinvestors.” 

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