Opalesque Industry Update - Hedge funds posted broad-based gains to begin the fourth quarter, as the U.S. government shutdown concluded while investors and fund managers positioned for an anticipated reduction of the Federal Reserve's stimulus measures in early 2014. The HFRI Fund Weighted Composite Index (FWC) gained +1.5 percent for October, 2013, the 10th gain in the last 12 months, with positive contributions across all strategies led by Equity Hedge and Event Driven, as was reported today by HFR, the established leader in indexation, analysis and research of the global hedge fund industry. The FWC Index has gained +7.2 percent through October, the best YTD performance since 2009 when it gained +20.0 percent. |
Equity Hedge and Event Driven funds continued to drive industry gains, with the HFRI Equity Hedge Index gaining +1.8 percent for the month, bringing YTD performance to +11.3 percent. Equity Hedge performance is the strongest since gaining +24.6 percent in 2009 and exceeds the annualized performance of EH since 1990. Equity Hedge gains were driven by Quantitative Directional and Fundamental Growth strategies, which gained +2.7 and +2.3 percent, respectively, while the HFRI Equity Market Neutral Index gained +2.1 percent, the strongest monthly gain in nearly 13 years (December 2000).
The HFRI Event Driven Index posted a gain of +1.5 percent, the 15th monthly gain in the trailing 17 months, and bringing YTD performance to +10.0 percent. Event Driven gains were again led by Activist and Special Situations strategies, with Activist funds climbing over +3.5 percent for the month and +14.7 percent YTD, while Special Situations funds gained +1.9 percent for October and +11.9 percent YTD.
Macro hedge funds ended a five month performance decline, with the HFRI Macro Index gaining +1.1 percent, paring the YTD decline to -0.90 percent, with contributions from Emerging Markets, CTA, Active Trading and Multi-Strategy strategies. The HFRI Emerging Markets Index advanced +2.5 percent for the month, with contributions across all EM regions led by Emerging Asia and Russia/Eastern Europe. The HFRI Macro: Systematic Diversified/CTA Index gained +1.4 percent for the month, paring the Index YTD decline to -2.4 percent.
Fixed Income based Relative Value Arbitrage strategies extended the profile of consistent gains which have defined the growth of RVA over the past five years. The HFRI Relative Value Index gained +1.2 percent for the month, the 50th gain in 58 months since December 2008, over which time the Index has produced an annualized gain of +10.8 percent. RVA gains were led by the HFRI: FI: Corporate Index, which was up +1.8 percent for the month, as well as Convertible Arbitrage and Volatility strategies, which both rose +1.2 percent for the month.
The HFRI Fund of Hedge Funds (FOF) Index gained +1.5 percent for the month, the best performance since January, bringing YTD returns to +6.6 percent, the strongest gain since the Index gained +11.47 percent in 2009.
"The environment for hedge fund investing continues to improve into the fourth quarter, with strong equity and credit market trends complemented by increased investor risk tolerance, improved traction in macro currency and commodity strategies, and effective positioning and hedging across fixed income based strategies," stated Kenneth J. Heinz, President of HFR. "While many of the same economic and political risks that have defined financial market performance over the past five years still remain, improved clarity and progress on these have contributed to an environment which is rewarding and opportunity-rich for fundamentally based, mean-reverting strategies. We expect an improved contribution from Macro and CTA hedge funds complementing gains across other strategies to drive hedge fund industry gains into year end and early 2014."
Comments reference Flash Update performance figures as posted on November 7, 2013.