Hedge funds posted the second consecutive month of gains in October, as equity markets continued their broad advance on improving prospects for global economic growth.
Credit markets remained strong and short dated fixed income advanced on expectations for continued stimulus from the US FOMC.
The US dollar declined against both the Euro and the Yen, while commodity prices rose, with strong gains in sugar and rice, among other agriculturals.
The HFRI Fund Weighted Composite gained 2.35 per cent for the month, with broad-based gains and positive contributions from all main strategy areas.
Macro strategies had the most positive contribution to performance for the month, with the HFRI Macro (Total) Index gaining 2.70 per cent. Commodity and metals exposure had the most positive influence on macro performance, contributing to gains across all macro sub-strategies; currency exposure also had a strong positive contribution. Systematic strategies outperformed discretionary macro strategies, but both posted gains for the month with the HFRI Macro: Systematic Diversified Index gaining 3.62 per cent for the month.
Equity hedge funds also posted strong gains for the month, with the HFRI Equity Hedge (Total) Index gaining 2.47 per cent. Exposure to equities in energy/basic materials and quantitative directional strategies posted gains of 5.22 per cent and 3.62 per cent, respectively, leading all equity hedge sub-strategies. Gains were also seen across fundamental growth, value, technology/healthcare and equity market neutral, with only short bias detracting from index performance with a loss of 2.13 per cent.
The HFRI Event Driven Index posted a gain of 1.70 per cent, with positive contributions from activist and credit arbitrage sub-strategies. With financial market liquidity continuing to be strong and risk tolerance returning to investors, all event driven sub-strategies posted gains for the month, with these including distressed, private issue/reg D, special situations and merger arbitrage.
The HFRI Relative Value Index posted a gain of 1.65 per cent, continuing to lead all main strategies for 2010 with a YTD gain of 9.82 per cent. Prospects for additional fixed income purchases by the US FOMC as well as strength in energy and commodity sectors both contributed to gains for the month. Yield alternatives, which includes energy infrastructure investments, posted a gain of 2.21 per cent for the month, while both convertible arbitrage and RV: multi-strategy funds also posted gains for the month.
The HFRI Fund of Hedge Funds Index gained 1.49 per cent, while the HFRI Emerging Markets Index gained 2.51 per cent, with the strongest regional contribution from emerging Asia.
