Hedge funds registered a 0.20 per cent loss in October, according to the Barclay Hedge Fund Index compiled by BarclayHedge.
“Prior to October’s loss, the Barclay Hedge Fund Index gained 21.96 per cent during seven consecutive months of positive performance,” says Sol Waksman, founder and president of BarclayHedge.
“It was the best return for a string of winning months since the 18-month period from October 2002 through March 2004, when the index gained 25.80 per cent.”
Eleven of Barclay’s 18 hedge fund indices lost ground in October, while the seven other strategies gained nearly equal value.
Equity long bias fell 1.79 per cent, European equities lost 1.69 per cent, healthcare and biotechnology was down 1.35 per cent, equity long/short lost 1.21 per cent, and technology was down 1.17 per cent.
On the positive side, the Barclay Equity Short Bias Index rebounded with a 4.34 per cent gain, fixed income arbitrage gained 2.20 per cent, distressed securities rose 1.53 per cent, convertible arbitrage was up 1.27 per cent, and emerging markets gained 1.05 per cent.
“Most equity markets in developed countries followed the US lead and lost ground in October,” says Waksman. “Emerging markets did better as gains in China, Russia and Brazil set the trend.”
Increasing investor confidence in recent months fueled a broad rally in the fixed income sector. Since the beginning of the year, investment grade credit spreads have decreased by approximately 300 basis points. High yield spreads have decreased by more than 1000 points.
“Hedge funds investing in fixed income will need to be more selective going forward,” says Waksman. “The easy money in this sector is probably off the table.”
The Barclay Fund of Funds Index lost 0.09 per cent in October, but is still up 8.66 per cent year to date.
