Opalesque Industry Update - Hedge funds posted strong gains in September, as the US Federal Reserve maintained current bond purchase stimulus measures, German elections produced favorable results and investors prepared for the US government to shut down over the budget bill impasse. The HFRI Fund Weighted Composite Index gained +1.6 percent for the month, the strongest performance since January 2013 and the second highest gain in the last 19 months, as reported today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry.|
September performance was led by Equity Hedge strategies, with the HFRI Equity Hedge Index gaining +2.6 percent, also the strongest month since January and bringing performance for the first three quarters of 2013 to a gain of +9.2 percent, leading all hedge fund strategy indices. Growth areas including Technology, Healthcare and Emerging Markets all had strong contributions to performance, with the HFRI EH: Technology/Healthcare Index up +4.4 percent for the month, and +17.4 percent for the year through September 30, making it the top performing index for the period. Fundamental Growth hedge funds gained +3.3 percent for the month, while the HFRI Emerging Markets Index also gained +3.3 percent.
Event Driven strategies posted strong performance with the HFRI Event Driven Index gaining +2.0 percent for the month, driven by record corporate bond issuance, successful IPO issuance and increasing investor risk tolerance. Event Driven narrowly trails EH as the leading area of strategy performance for 2013, with a YTD gain of +9.0 percent. Event Driven performance was fueled by the dynamic environment for strategic and financial transactions and shareholder activism, with the HFRI ED: Special Situations Index climbing +3.2 percent for the month, contributing to a YTD gain of +11.2 percent. Activist strategies also gained +3.2 percent in September and have gained +11.9 percent in the first three quarters of 2013.
Fixed Income-based Relative Value Arbitrage strategies posted gains for the month, with the HFRI Relative Value Index gaining +1.4 percent. RV gains were broad-based across Sovereign, Corporate and Volatility strategies, with FI: Sovereign gaining +2.6 percent for the month, while RV: Volatility and FI: Corporate gained +1.9 and +1.5 percent, respectively.
Macro funds posted a decline for the month, with gains in Discretionary Macro funds offsetting declines in Commodity and Systematic strategies. The HFRI Macro Index declined by -0.2 percent for the month, while positive contributions from Sovereign fixed income and Emerging Markets exposure contributing to a gain of +1.2 percent for Discretionary Macro managers. The HFRI Systematic Diversified Index declined by -0.5 percent, with weakness in Commodity exposures. The HFRI Fund of Hedge Funds gained +1.9 percent for the month, bringing YTD performance to +5.6 percent, in line with the HFRI Fund Weighted Composite Index.
“Hedge funds were well positioned for the dynamic environment which materialized in September, from the equity gains and falling yields on the Fed no taper decision, through the significant German elections, the Healthcare stock leadership on Affordable Care Act and into the equity market selloff on the US budget deliberations into month end,” stated Kenneth J. Heinz, President of HFR. “Equity Hedge and Event Driven funds are on pace for the strongest gains since 2009 and these continue to attract investor interest through the evolving macro political environment. Despite low volatility of hedge funds relative to equity markets, institutional investors are likely to continue increasing their exposure to hedge funds as ED & EH strategy gains accelerate and investor risk tolerance continues to normalize through the current period of uncertainty, driving industry growth through year end and into 2014.”