Broad Market Beats Hedge Fund October Performance

The Hennessee Hedge Fund Advisory Group said its Hennessee Hedge Fund Index finished the month with a 0.91% return. That compared with an 8.84% return for the S&P 500 Index, 10.6% for the Dow Jones Industrial Average and 13.45% for the Nasdaq Composite Index.

However, on a year-to-date basis, hedge funds are down 4.80%, far better than the overall performance of the US equity markets, as the S&P 500 is down 21.89%, the Dow Jones Industrial Average down 16.21%, and the Nasdaq down 31.81%, according to Hennessee. In addition, Lipper Mutual Funds are down 20.08% year-to-date.

October continued to exhibit the volatility in the market as Latin American managers continued their streak as being either the best or worst performing strategy.  

Latin American managers had the best performance in October with a   7.88% return as the newly elected President da Silva of Brazil softened his leftist stance, Hennessee reported

Healthcare/Biotech managers came in a distant second with a 2.88% return as strong earnings were announced and all the profitable biotech companies’ beat Wall Street earnings expectations.  

In third place was Technology with an October return of 2.72%.   Technology returns picked up due to a sector rally spearheaded by Microsoft’s announcement that it would beat earnings estimates.

On the downside, High Yield was the worst performer for the month of October with a 2.93% drop, with high yield bonds continuing to trade down due to imbalances between supply and demand.  

Pacific Rim was the second worst performing style in October, posting a minus 1.90% return, mainly caused by Japan’s weak banking reform plan frustrating investors.   Europe hedge fund managers came in third worst at minus 1.81% as the reluctance of the European Union’s Central Bank to lower interest rates caused investors to back off the market.

In September, both the Hennessee index and the broader market indices were in the minus column – only the market indices much more so. (See  Hedge Funds in the Red in September ).