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HFRI Fund Weighted Composite Index declines -2.8%in September (-4.74% YTD)

Monday, October 10, 2011
Opalesque Industry Update - Hedge funds ended the volatile 3Q11 with the HFRI Fund Weighted Composite Index posting a decline of -2.8 percent for the month of September, bringing losses for the quarter to -5.5 percent. The quarterly performance decline was the fourth worst in industry history, trailing only 3Q and 4Q 2008 and 3Q 1998.

Losses were widespread across industry strategies and regions, with Equity Hedge and Emerging Markets posting the steepest declines. The HFRI Equity Hedge Index fell by -4.9 percent in September, ending the quarter with a decline of -9.6 percent with negative contributions from most sub-strategies; the HFRI EH: Energy/Basic Materials Index posted a steep decline of -9.5 percent in September, while Fundamental Growth strategies losing -6.1 percent. The lone Equity Hedge sub-strategy to post a gain in September was dedicated Short Bias funds, which gained +6.9 percent, the fifth consecutive monthly gain.

Emerging Markets funds posted a decline of -7.4 percent in September and over -12.1 percent in 3Q. The weakest regional areas of performance were Emerging Asia, Russia/Eastern Europe and Latin America, each of which declined by over -9.0 percent in September. Event Driven strategies also posted sharp losses for September, with the HFRI Event Driven Index declining -3.3 percent, including negative contributions from Distressed and Special Situations funds.

Losses were less pronounced across Relative Value and Macro strategies with positive contributions from US dollar strength and falling yields only partially offsetting equity, credit and commodity sensitive declines. The HFRI Relative Value Index declined by -1.2 percent, with negative contributions from sovereign fixed income and real estate focused sub-strategies. Inclusive of September losses, Relative Value has now posted a narrow decline of -0.17 percent YTD 2011. The HFRI Macro (Total) Index declined by -0.4 percent for September; despite the sharp reversal in widely held gold positions, systematic trend following sub-strategies posted a gain of +0.2 for the month, the third consecutive month of positive returns.

"Intense volatility negatively impacted nearly every area of financial markets and the hedge fund industry in September, as weakness was both pervasive and widespread," said Kenneth J. Heinz, President of HFR. "Hedge fund managers and investors continue to maintain a critical focus on risk and financial market liquidity, as well as the far reaching impacts of the ongoing European sovereign debt crisis. In the current environment, fund managers are positioning for continued volatility and opportunities created by dislocations across asset classes."...Full performance table: Source
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