Hedge Funds Sink In Oct.

Nov 21 2014 | 1:01pm ET

Hedge funds gave back a slice of their already-meagre returns last month, according to one industry benchmark.

The Barclay Hedge Fund Index shed 0.11% in October—a month that saw the Standard & Poor’s 500 Index end in record territory. The index is now up just 2.87% on the year, compared to double-digits for the broader market.

Eleven of the 18 strategies tracked by BarclayHedge lost ground in October. Event-driven funds were hit hardest, dropping 2.32% as a number of major deals fell apart. Equity short-bias funds fell 2.14%, distressed securities 1.79%, merger arbitrage 1.32% and European equities 0.92%. Despite the declines, short-bias remains the only strategy with a significant loss on the year, down 12.85%.

“Continued easing by the ECB and the BOJ as the Federal Reserve wound down its bond purchases, the unraveling of crowded trades in Abbvie/Shire and Fannie/Freddie and S&P 500 earnings exceeding expectations propelled risk asset prices sharply lower in the first half of the month, only to recoup those losses by month’s end," BarclayHedge founder Sol Waksman said. “At mid-month the S&P 500 was down by 5.6 percent, but managed to sharply reverse course and end the month up 2.3 percent. Yields on U.S. 10-year Treasuries fell to their lowest level since May 2013, only to see yields rise from 1.86 per cent at mid-month to 2.33 per cent by the end of October."

October’s winners were led by 2014’s top strategy, healthcare and biotechnology, up 3.42% on the month and 16.11% on the year. Technology funds enjoyed a 1.43% return, while long-biased equity funds rose an average of 0.62%.

Funds of hedge funds followed their constituents down in October—albeit at a faster rate. The Barclay Fund of Funds Index shed 0.71% last month and is up just 1.4% on the year.


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