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The HFRI Fund Weighted Composite Index declined -0.4 percent in September, ending the third quarter with a gain of +0.3 percent despite posting declines in two of the three months. For the first three quarters of 2014, the HFRI Fund Weighted Composite gained +3.4 percent, topping the DJIA, Russell 2000 and most regional European equity markets, though trailing the S&P 500 and Nasdaq. The HFRI Fund of Funds Index posted a narrow gain of +0.07 percent for the month.

Macro gains partially offset declines in other strategies and vaulted Macro to the second best performing hedge fund strategy for 2014, with a gain of +4.1 percent for the year. Macro trails only fixed income-based Relative Value Arbitrage year-to-date (YTD); the HFRI Relative Value Arbitrage Index declined -0.2 percent in September but leads all strategies with a YTD gain of +5.1 percent. Macro Multi-Strategy, CTA and Currency focused exposures led September performance, with the HFRI Macro: Multi Strategy Index gaining +1.8 percent for the month, the fifth consecutive gain and the best performance since December 2010; HFRI Macro Currency Index advanced +1.3 percent for the month, the fourth gain in five months. HFRI Macro: Systematic Diversified/CTA Index gained +2.6 percent for the month, bringing YTD performance to +5.2 percent; both the HFRI Macro (Total) Index and CTA Index have posted declines in each of the three previous calendar years.

The HFRI Relative Value Index fell -0.2 percent for the month as yields increased, high yield credit widened and equities declined, with a drop in Sovereign and Yield Alternative exposures only partially offset by gains in Asset Backed. The HFRI FI: Sovereign and Yield Alternative Indices was down -1.0 and -1.6 percent, respectively, while the HFRI FI: Asset Backed Index gained +1.0 percent.

Equity and credit sensitive Equity Hedge (EH) and Event Driven (ED) strategies fell for the month, with the HFRI Equity Hedge Index falling -1.8 percent while the HFRI Event Driven Index declined -0.95 percent. Equity Hedge declines were led by Fundamental Growth and Energy/Basic Materials, with these HFRI Indices falling -2.8 and -4.4 percent, respectively, for the month. EH declines were partially offset by Short Bias exposure, with the HFRI Short Bias Index gaining +1.0 percent for the month. Event Driven declines were led by Distressed exposures, with the HFRI Distressed/Restructuring Index falling -1.3 percent.

"The Macro resurgence accelerated in September, leading industry performance as equities, bonds and other hedge fund strategies declined. Macro hedge funds, including both trend following, quantitative as well as fundamental discretionary strategies, have re-emerged recently as powerful, uncorrelated exposures as US stimulus measures are wound down and the US economy continues to proceed toward interest rate normalization," stated Kenneth J. Heinz, President of HFR. "Macro is expected to exhibit performance leadership through year end 2014 as realized volatility remains elevated and fundamental macroeconomic relationships are re-established without the distortions of stimulus measures, contributing to a reversal of recent capital outflows in Macro, as investors position for a continuation of these dynamic trends."

PD