Hedge fund strategies post positive returns in October

Hedge fund strategies post positive returns in October

Most hedge fund strategies posted positive returns in October despite global stock markets slipping in the second half of the month as mixed macro readings pointed to the fragility of the economy, according to a report by Lipper.

Against that backdrop there were signs that US manufacturing activity could be picking up.

At the same time, business activity increased in China and fuelled hopes that Asia may lead a global recovery.

Credit-focused and relative-arbitrage strategies navigated market volatility better than directional and event-driven strategies throughout the month.

Managed futures (-1.02 per cent) and long bias (-0.38 per cent) both posted negative performances.

However, the best performing strategy for the month of October was dedicated short-bias (+1.61 per cent).

Fixed arbitrage (+1.52 per cent) and multi-strategies (+0.65 per cent) were the runners-up in the month.

The long bias (-0.38 per cent) and long/short equity (+0.04 per cent) strategies, focusing on US companies, were dragged down as stock markets tumbled for the first time since February.

Equity managers protected their portfolios against market volatility, shorting those sectors—financials (-6.04 per cent), materials (-5.33 per cent), and telecommunication services (-4.85 per cent)—that declined throughout the month.

Gaining from spikes in volatility and arbitrage strategies, convertible arbitrage (+0.53 per cent) and volatility arbitrage (+0.63 per cent) finished the month on a positive note.

The CBOE VIX Index increased 19.84 per cent and climbed back above the 30 mark at the end of the month—the highest reading since July.

Despite M&A dollar volume in the US being down 46 per cent from September—the slowest month in 2009—event-driven managers (+0.29 per cent) continued to post positive returns, sustained by the strong performance of the global high-yield market.

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