Hedge funds bounced back with strong positive performances in October after two months of negative returns in August and September. The Eurekahedge Hedge Fund Index rose 2.04%1 on the back of renewed optimism in the market and resurgent risk appetite. The MSCI World Index gained 8.65%2 amid moves to resolve the European debt crisis and better than expected economic data from the US. October YTD; the markets are down 7.60%3 while the Eurekahedge Hedge Fund Index is down 2.90% and the Mizuho-Eurekahedge Top 100 Index4 (asset weighted) remains in the black with a 2.61% return.
Most managers were able to deliver significant downturn protection through the short side, while high cash volumes and positions in safety assets also proved useful in such volatile market conditions. Even these assets were not fully protected, however, as early gains in bonds and precious metals were reversed later on in the month. Short term systematic trading was the best performing strategy in September, capturing gains through declining equities and increased volatility in the FX markets.
September 2011 and August 2011 returns across geographical mandates
All regional mandates finished the month with positive returns. Asia ex-Japan managers witnessed the largest gains up 3.93%. Risk appetite was given a boost early in the month as European economies moved to recapitalise their banks, which also benefited hedge funds investing in Asia as sentiment turned positive. The MSCI Asia Pacific Ex Japan Index5 surged 8.63% in October.
Among other regions, European managers posted impressive returns of …