Research

Hedge Fund Performance Commentary

Introduction

Hedge funds continued their winning streak through October, making it the fourth consecutive month of healthy returns. The Eurekahedge Hedge Fund Index was up 2.27%1 in October, bringing its year-to-date October return to a strong 7.33%, as the underlying markets continued their upward trend for the second month running. The MSCI World Index2 gained 2.77% in the month, up 2.69% for the year.

All regional mandates delivered positive returns, with the exception of Japanese managers, as global markets kept up the momentum built up in September. A strong corporate earnings season and expectations of further quantitative easing resulted in healthy movements in the underlying markets. Asia ex-Japan funds continued their strong run, coming out on top for the fourth consecutive month, with gains of 3.08% and all strategies ending the month in positive territory. Managers investing in China witnessed a second month of excellent returns, up 3.78%, taking their two-month gain to 10.33%. Chinese managers were helped by a strong run in the underlying equity markets – the Shanghai Composite rose 11.53% while the Hang Seng gained 3.30%.

Managers in developed markets also registered some strong gains, with the Eurekahedge North American Hedge Fund Index gaining 2.47% in October. The healthy corporate earnings environment and increased investor confidence resulted in favourable conditions for equity based strategies – the S&P 500 was up 3.69% for the month.

The chart below shows hedge fund returns for July and August 2010 across different geographical mandates.

September and October 2010 Returns

In the YTD returns measure, managers investing in emerging markets continued to lead the way – the Eurekahedge Asia ex-Japan Hedge Fund Index currently stands at 8.99% YTD October while the Eurekahedge Latin American Hedge Fund Index is at 8.15%. Emerging market hedge funds, which tend to be heavily weighted in equities, have profited from…

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Footnote

1 Based on 59.48% of the NAV for October 2010 as of 14 November 2010.

2 MSCI, The World Index Free Standard Core Local Currency.

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