Hedge funds secured another positive return in October, with all styles proving profitable as risk appetite remained positive on the expectation of an imminent announcement of further quantitative easing by the US Federal Reserve, according to hedge fund provider Man.
Equity markets continued along the same bullish path in October as in September.
However, speculation that any monetary easing in the US would be less than anticipated weighed on investor minds, with additional concern from some over an unexpected month-end interest rate rise in China.
Nevertheless, the MSCI World Index ended up 2.8 per cent with robust performance from materials, energy and information technology as the release of better-than expected Q3 earnings buoyed market sentiment.
Anthony Lawler, head of portfolio management at Man’s multi manager business, says: “Hedge funds posted another month of positive returns across all styles in October, with managed futures and global macro in particular continuing to deliver strong performance.”
Managed futures managers provided standout returns in October, with the imminent prospect of QE2 and strong Q3 corporate earnings allowing many long-term trend followers to capitalise on a continuation of some recent strong market trends. Gains were driven mainly through long exposure to commodities, helped in part by the weakened US dollar.
Global macro continued its solid run with all sub-styles ended up for the month, with strong themes such as a quantitative easing driven rally in risk assets and the weakness in the US dollar continuing on from September. Emerging market managers also outperformed as currency and equity positions benefited from the increase in risk appetite.
Equity hedged performed well as the continuing equity rally provided a tailwind to returns while exposure to event driven and relative value managers also proved profitable with returns supported by strong underlying credit markets.
Lawler adds: “Looking ahead we believe that there is a rich opportunity set in the investment styles of global macro and managed futures. We see opportunities in emerging markets with managers who use an active trading approach across asset classes rather than those with more consistent directionality. We also view the outlook as positive for fundamental long/short credit managers given the high dispersion present in global credit spreads.”