The Eurekahedge Hedge Fund Index gained 1.88%1 in October as optimism returned to the global economy and markets posted strong rallies. The MSCI World Index gained 8.65%2 amid moves to resolve the European debt crisis, as well as better than expected economic data from the US.
Global markets are down 7.60%3 (October YTD), while the Eurekahedge Hedge Fund Index is down 3.05%. The asset weighted Mizuho-Eurekahedge Top 100 Index4 continues its strong run for the year and is now up an impressive 1.17% in 2011.
Key highlights for October:
â¢ The Eurekahedge Hedge Fund Index witnessed its largest gain of 2011, rising 1.88% during October
â¢ The Mizuho-Eurekahedge Top 100 Index remained in positive territory for the year with a 1.17% return (October YTD)
â¢ Long/short equity funds posted their largest gain since May 2009, gaining 4.1%
â¢ Early reports indicate net positive asset flows to hedge funds in October 2011
â¢ Japanese hedge funds have attracted the largest asset flows (in percentage terms), increasing 7.5% for the year, allowing Asian hedge fund assets to remain at US$130 billion
â¢ Launch activity remained strong through 3Q 2011 with more than 150 new hedge funds launched during this time5
All regional mandates finished the month with positive returns. Managers investing in Eastern Europe & Russia witnessed the largest gains, up 6.36%. Risk appetite was given a boost early in the month as European economies moved to recapitalize their banks; the emerging markets in the region gained substantially from the positive sentiment. The Eurekahedge European Hedge Fund Index also posted healthy gains of 2.83% in October.
Among other regions, Asia ex-Japan managers posted impressive returns of 4.13%, posting gains across the different strategies and asset classes. The MSCI AC Asia Pacific Ex Japan Index was up 8.63%. North American managers also posted strong profits in October, up 2.74%, on the back of European optimism as well as better than expected economic data. The S&P 500 witnessed its largest gain in 20 years, posting returns of 10.77% in October. A number of North American managers, as well as managers across other regions, missed out on the early rally, as risk aversion from September saw them with net negative exposures at the start of October. Latin American managers also posted gains of 1.67% during the month, and continue to remain ahead of the rest for year â the Eurekahedge Latin American Hedge Fund Index is up 1.42% October YTD.
Hedge funds investing in riskier assets raked in the largest gains in October with distressed debt managers gaining 3.56% while long/short equity managers posted excellent gains of 4.11%. The US corporate credit markets were up, along with equity markets, on the back of surging risk appetite during the month. The high yield bond sector witnessed strong inflows from investors looking to take advantage of opportunities after the segment experienced two consecutive months of sell-offs. The BofA Merrill Lynch High Yield Index6 was up 5.96% during the month. Long/short equity funds posted their largest gain since May 2009 as equity market rallies were supported by US economic indicators that kept beating estimates throughout the month, which in turn were supplemented by positive movements in the European debt situation. CTA/managed futures funds were down 1.84% during month, with short-term systematic traders losing out the most. CTA/managed futures funds investing in equity index futures posted strong returns however, while managers with exposures to metals (both base & precious) and oil also witnessed gains for the month.
1 Based on 37.32% of funds which have reported October 2011 returns as at 9 November 2011
2 MSCI AC World Index All Core â Local
3 As represented by the MSCI World Index
4 The Mizuho-Eurekahedge Top 100 index is a new asset weighted index that tracks the performance of the largest 100 hedge funds in the Eurekahedge database
5 Eurekahedge is currently tracking 122 funds
6 Bank of America Merrill Lynch US High Yield Master II Index (Total Return Index, in Local Currency)