Hedge funds gained 3.73% in October, according to the Barclay Hedge Fund Index compiled by BarclayHedge. The Index is down 3.44% in 2011.

“After five long consecutive losing months which saw the S&P 500 decline 16.2 percent, investors switched into risk-on mode and the S&P soared to a 10.93 percent gain in October, its best monthly return since December 1991,” says Sol Waksman (pictured), founder and president of BarclayHedge. “Robust corporate profits, a plan for Greece, and easing of concerns of a double-dip recession helped to revive investor enthusiasm for equities.”

All but one of Barclay’s 18 hedge fund indices had gains in October. The Equity Long Bias Index jumped 6.64%, its largest one-month increase since a 6.65% gain in May of 2009.

Emerging Markets were up 4.30%, Healthcare & Biotechnology gained 4.00%, the Event Driven Index was up 3.77%, Equity Long/Short added 3.36%, Technology gained 3.18%, and European Equities were up 3.04%.

“Although most hedge fund strategies were profitable, as a whole the funds underperformed equities in October,” says Waksman. “Our late September monthly survey of fund managers found that bearish sentiment rose to 57 percent, its highest level for the year.  Under the circumstances, managers may have been slow to remove some of their hedges.”

The Equity Short Bias Index plummeted 8.77% in October. Equity Short Bias remains up 4.53% for the year.

“The Barclay Equity Short Bias Index suffered its biggest single-month loss in three years, since the 12.27 percent drop in October of 2008.”

The Barclay Fund of Funds Index gained 1.37% in October, and is down 4.47% year-to-date.