Industry Updates

HFRI Fund Weighted Composite Index +0.26% (est) in November, macro funds decline-0.92% (est) - HFR

Tuesday, December 07, 2010

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Opalesque Industry Update - With a strong contribution from Equity Hedge strategies, hedge funds posted a gain for November, with the HFRI Fund Weighted Composite Index gaining +0.26%. Sovereign credit risk was again a focus for investors in the month of November, as the leaders of the EU worked to provide financial assistance to member countries struggling with outstanding sovereign obligations and sovereign spreads rose sharply. The Euro declined for the month, along with most other major currencies, as investors moved into US dollar denominated assets. Equity markets generally posted modest declines, though with some dispersion as Japan rose while European markets fell. Capital markets were open to new public offerings, with a notable issue from GM coming to market in November.

The HFRI Equity Hedge (Total) Index gained +1.09%, with a strong contribution from Energy & Basic Materials strategies which gained +5.20% in November, adding to October’s +4.05% gain and bringing YTD performance to 12.26%. Equity Hedge gains were broad-based across other sub-strategies, with Quantitative Directional, Fundamental Growth, Fundamental Value and Equity Market Neutral all having significant positive contributions. Detracting from the positive EH performance, Sector Technology funds posted a narrow loss for the month of -0.39%, while Short Bias funds declined -4.50%.

Macro funds were the weakest area of hedge fund performance in November, offsetting October’s gain with a decline of -0.92% for the HFRI Macro (Total) Index. Losses were distributed across both Systematic and Discretionary strategies, with the lone area of positive contribution from Commodity focused funds. The HFRI Macro: Systematic Diversified Index declined -2.52%, paring the YTD gain for these to +4.67%; losses in currencies and fixed income were only partially offset by gains in commodities. Discretionary Thematic Macro strategies also posted a decline of -0.18% as quantitative easing proceeded in the US and realized volatility increased into month end. Macro strategies focusing primarily on Commodities posted a partially offsetting gain of +2.83%.

The HFRI Relative Value (Total) Index posted a gain of +0.37%, pushing the YTD gain of in Relative Value strategies to +10.21%. Credit focused strategies posted gains even as yields rose, with a strong contribution from Fixed Income: Asset Backed strategies, which gained +1.37%; Convertible Arbitrage and Fixed Income: Corporate posted gains of +0.23% and +0.12%, respectively. Yield Alternative strategies posted a partially offsetting decline of -0.67%, with weakness in Real Estate & Infrastructure components.

The HFRI Event Driven (Total) Index posted a gain of +0.26%, as gains in M&A, Activist, new issuance and equity special situations exposures were offset by losses in credit-oriented strategies. Special Situations and ED: Multi-Strategy both gained +0.45% and +0.54%, respectively, which were partially offset by losses in Distressed/Restructuring and Credit Arbitrage of -0.40% and -0.06%. Merger Arbitrage posted its 23rd gain in the past 24 months, with a narrow gain of 0.10%, while Private Issue/Reg D strategies declined by -0.77%.

The HFRI Fund of Hedge Funds Index declined by -0.46%, while the HFRI Emerging Markets (Total) Index declined by -0.28%.

(press release)

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