According to an S&P press release, September hedge fund performance was up 0.47%, as measured by the S&P Hedge Fund Index. All sub-indices – the S&P Directional/Tactical Index, the S&P Arbitrage Index, and the S&P Event-Driven Index – were also in the black for the month.
The S&P Directional/Tactical Index finished the month up 0.60%, with two of its three strategy components posting positive returns. In particular, the Managed Futures strategy was up 1.59%, riding high on the back of increasing crude prices. S&P attributes this rise and the subsequent hedge fund windfall to supply disruptions in Iraq, the after-effects of a particularly vicious hurricane season, increasing demand in Asia, and prolonged and persistent fears of global terrorism.
The S&P Arbitrage Index saw gains of 0.44% for the month, with strong performances being turned in by the Fixed-Income Arbitrage sector. Convertible Arbitrage saw even returns, while Equity Market Neutral strategies saw a slight decline in profits. S&P attributes the strong performance of Fixed-Income strategies to investor confusion regarding the effects of the Fannie Mae investigations. Although the quasi-federal mortgage purchaser is under investigation for poor accounting practices, investors failed to realize that asset-backed instruments were backed by actual mortgages, and not by the Fannie Mae equity, according to S&P specialists.
Convertible Arbitrage, a subset of the S&P Arbitrage Index, drifted sideways because of stable credit spreads and five-year lows in volatility, both factors that effect convertible arbitrage opportunities.
The S&P Event-Driven Index saw positive returns as well, with all three strategy components – Special Situations, Merger Arbitrage, and Distressed Securities – posting gains.The S&P Equity Long/Short Index also produced solid gains on the month, with a 1.67% return being noted.
The S&P Hedge Fund Index is designed to be investable as well as be representative of the investment opportunities available in the hedge fund universe. Its values are calculated and published daily, and are available at www.sp-hedgefundindex.com .