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Hedge Funds Headed for Best Year Since 2003, Eurekahedge Says

Date: Wednesday, October 14, 2009
Author: Tomoko Yamazaki, Bloomberg

Hedge funds returned 2.5 percent in September, heading for their best performance in six years, as global stock markets rose and the U.S. Federal Reserve suggested interest rates will remain low, Eurekahedge Pte said.

The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, gained for the seventh straight month, bringing its year- to-date advance to 16.1 percent, according to the Singapore- based data provider’s preliminary report based on 52 percent of the funds that reported performances. The industry grew by $26.3 billion last month, bringing total assets managed to $1.42 trillion, the report showed.

Assets are expected to exceed $1.5 trillion by the end of the year and the benchmark index is set to match 2003’s 21 percent return, Eurekahedge said. Hedge funds this year are reversing the record losses of 2008 as stock markets rebound on signs economies are recovering from the first global recession since World War II.

“The hedge fund industry has enjoyed a sort of renaissance of performance in 2009, which has helped mend a reputation which was battered in 2008,” said Kirby Daley, a senior strategist in Hong Kong with Newedge Group’s prime brokerage business. “More needs to be done to win back investor confidence more fully in terms of alignment of interests between managers and investors, and proof that managers can traverse market dislocations with more agility.”

The index’s performance for the fist nine months of the year was the best in a decade, Eurekahedge said. The MSCI World Index of 23 developed nations climbed 3.8 percent in September, bringing its year-to-September advance to 22 percent.

Regional Indexes Climb

Six of Eurekahedge’s seven regional indexes rose last month, with Eastern Europe and Russian funds leading the gains. The measure tracking Japan-focused hedge funds declined 1.1 percent as the yen strengthened, the report showed.

The Eurekahedge Eastern Europe & Russia Hedge Fund Index jumped 10 percent, helped by energy industry gains in Russia and rising currencies in Eastern Europe, the firm said. The gauge tracking emerging markets rose 3.6 percent. The North American index added 2.9 percent, as the Standard & Poor’s 500 Index rose for a seventh-straight month.

All nine Eurekahedge measures tracking different hedge-fund strategies gained, the firm said. An index of so-called event- driven funds gained 4.6 percent, last month’s best-performing index. Event-driven funds invest in companies such as those going through mergers and acquisitions.

An index of managers investing in fixed income climbed 1.8 percent benefiting from Fed statements that it will continue its bond purchase program, Eurekahedge said.

Eurekahedge’s global index last year slid 11 percent, the most since the firm began tracking data in 2000. Hedge-fund assets increased by $21.4 billion in August, growing for a fourth straight month, the data provider said last month.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether asset prices will rise or fall.

Eurekahedge plans to release a full report later this month.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net