Emerging Markets Rise, Short Bias Sinks In Oct.

Nov 15 2007 | 11:40am ET

Emerging markets and short-biased hedge funds were on opposite ends of the market in October, according to data from the Credit Suisse Index Co.

Overall, the Credit Suisse/Tremont Hedge Fund Index rose 3.16% last month, and is up 13.41% year-to-date. Emerging markets was (again) far and away the strongest strategy, adding 5.48% on the month. It is also the best-performing strategy of the year, returning 20.94% through October.
“The [Federal Reserve] interest rate cuts promoted a rally in global stock markets while treasury notes declined, the dollar weakened, and crude oil rose to a record $95.91 a barrel,” CSI President Oliver Schupp said. “Overall, this market environment led to the majority of hedge fund sectors ending October on a positive note.”

Managed futures, event-driven multi-strategy and long/short equity also posted strong months, at 4.06% (6.69% YTD), 3.84% (18.54% YTD) and 3.73% (15.15% YTD), respectively. Multi-strategy funds were up 3.02% (11.71% YTD). Year-to-date, both global macro and event-driven funds are beating the Standard & Poor’s 500, with the former up 15.82% through October, when it added 2.72%, and the latter returning 14.77% in the period after a 2.91% return last month. The S&P500 is up 10.87% year-to-date, and returned 1.59% in October.

The only strategy in the red—both for October and year-to-date—was dedicated short bias, which fell a further 2.49% after September’s precipitous 4.94% decline. The strategy is down 3.93% year-to-date.

It was much the same story on the investable side: the Sector Invest Emerging Markets returned 4.8% on the month, and is up 17.22% year-to-date. Managed futures did almost as well, actually outperforming its non-investable counterpart with a 4.45% return (7.08% YTD), and investable long/short funds added 3.12% (11.9% YTD).

The Sector Invest Short Bias index was the only investable subindex down for the month, as it dropped 2.94% (down 5.71% YTD). Year-to-date, however, it has company: The Sector Invest Fixed-Income Arbitrage index is down 4.96% through October in spite of a positive 1.06% return last month.

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