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HFRI Fund Weighted Composite index posts 11th gain in 13 months, up 1.03% in November (8.31% YTD)

Monday, December 09, 2013
Opalesque Industry Update - Hedge funds extended 2013 gains in November, with positive contributions across all strategy areas led by Equity Hedge, as the HFRI Fund Weighted Composite Index posted its 11th gain in the past 13 months, as reported today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. The HFRI Fund Weighted Composite Index gained +1.0 percent for November, the third consecutive monthly gain, bringing year-to-date (YTD) performance to +8.3 percent. Equity Hedge (EH) funds led industry gains for November with the HFRI Equity Hedge Index climbing +1.2 percent, extending the YTD gain to +12.9 percent, putting EH on course for the best calendar year since climbing +24.6 percent in 2009. EH gains were led by funds concentrated in Technology, Healthcare and Fundamental Value strategies, with the HFRI EH: Technology/Healthcare Index gaining +2.3 percent for November and +19.7 percent YTD, while the HFRI Fundamental Value Index gained +1.5 percent for November and +18.0 percent YTD. EH gains were partially offset by dedicated Short Bias funds, which declined -1.3 percent in the month and have declined -15.9 percent YTD.

Macro strategies posted gains for the 2nd consecutive month despite the negative influence of declines in underlying Emerging and Commodity Markets. The HFRI Macro Index rose +1.1 percent in November, narrowing the YTD decline to -0.2 percent, putting Macro within striking distance of avoiding a third consecutive calendar year decline. Macro Multi-strategy funds and CTA's led gains for the month, with these up +1.9 and +1.3 percent, respectively. Discretionary Commodity funds gained of +0.4 percent, narrowing the YTD loss to -4.2 percent while Currency funds declined -0.1 percent. The HFRI Emerging Markets Index posted mixed performance, declining -0.2 percent for November, with gains in Emerging Asia and the Middle East partially offsetting declines in Russia and Latin America.

Event Driven (ED) funds also posted strong returns for the month, as shareholder activism continued to drive performance across ED strategies. The HFRI Event Driven Index gained +0.9 percent in November and +11.0 percent YTD, with leading contributions from Special Situations and Distressed strategies. The HFRI ED: Special Situations Index gained +1.1 percent for November and +13.0 percent YTD, while HFRI ED: Distressed Index gained +1.0 percent for November and +12.3 percent YTD. Activist strategies have led ED performance for 2013 with a gain of +14.4 percent YTD.

Relative Value Arbitrage (RVA) strategies posted gains for November, despite an increase in U.S. yields and negative contributions across several interest rate-sensitive RVA sub-strategies. The HFRI Relative Value Arbitrage Index gained +0.4 percent for the month, bringing the YTD return to +6.1 percent. RVA gained were led by Asset-Backed, Volatility and Multi-Strategy exposures, which climbed +1.3, +1.0 and +0.7 percent, respectively, for November. These were partially offset by a decline in Fixed Income: Corporate and Sovereign sub-strategies, which fell -0.5 and -0.7 percent, respectively, for the month.

"Hedge funds have extended gains in recent months, with Equity Hedge and Event Driven funds leading industry returns as investor risk tolerance continues to normalize, supported by U.S.-centric equity market gains, but despite lack of clarity on reduction of U.S. stimulus measures contributing to mixed performance across global and emerging equity markets," stated Kenneth J. Heinz, President of HFR. "Through this improving but transitional environment, Macro and trend-following CTA funds have only recently begun to experience improved performance, following calendar year declines in both 2011 and 2012. We expect a continuation of improved Macro returns to drive overall hedge fund industry gains into early 2014, as investors return to Macro strategies offering low equity and fixed income correlation, flexible commodity and currency exposures and thematic approaches through this fluid macroeconomic environment.”

Comments reference Flash Update performance figures as posted on December 6, 2013.

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