Hedge fund returns were positive for the third consecutive month in September, up 3.37%1, ending the quarter on a positive note. The 3Q2010 return for the Eurekahedge Hedge Fund Index was 5.21%, making it the best quarter so far in the year. The year-to-date September return now stands at a healthy 5.15%, still ahead of the MSCI World Index2, which is marginally down at -0.08% YTD September.
Increased risk appetite and positive movements in the underlying markets led to the strongest September performance on record by hedge funds. The best performers were managers investing in emerging markets – the Eurekahedge Asia ex-Japan Hedge Funds Index gained 5.78% in the month, outpacing other major hedge fund regions for the third month running. Asia ex-Japan managers of all strategic mandates ended the month with positive results, with long/short managers gaining 6.09% and multi-strategy funds up 6.41%. The MSCI Emerging Markets Asia Index rose by 8.18% in the month.
The gains from September were spread across all regions; the smallest profit was delivered by Japan- focused hedge funds with a healthy 1.2% return for the month as the Nikkei gained 6.18%. North American and European managers also raked in strong profits in the month that was marked by increases in most asset classes across geographies. Although the US dollar declined in September, the S&P 500 was up 8.8% while bonds also witnessed a rally in the latter half of the month amid speculation of further quantitative easing by the US Federal Reserve.
The chart below shows hedge fund returns for August and September 2010 across different geographical mandates.
Emerging markets funds continue to dominate in the YTD measure, with both the Eurekahedge Latin American Hedge Fund Index and the Eurekahedge Asia ex-Japan Hedge Fund Index returning nearly 6% YTD September. A significant portion of emerging markets hedge funds allocate primarily to…
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1 Based on 61.43% of the funds reporting the NAV for September 2010 as of 15 October 2010.
2 MSCI World Index Free Standard Core Local