Hedge funds extend gains following upbeat economic data

Date: Monday, November 9, 2009
Author: Emily Perryman, Hedgeweek.com

Hedge funds consolidated their upward trend in September as the Credit Suisse/Tremont Broad Hedge Fund Index returned a solid 3.04 per cent for a seventh consecutive month of positive returns, according to a report from Lipper.

The Broad Hedge Fund index returned a positive 7.27 per cent in third quarter for a year-to-date performance of 14.97 per cent.

Resembling August’s pattern, all hedge fund strategies except dedicated short bias posted positive performance in September.

Consolidating the positive trend since March, the best performing hedge fund strategy was emerging markets, returning a remarkable 4.94 per cent, while the worst performing strategy was dedicated short bias at -5.27 per cent.

Monthly performance dispersion among Credit Suisse/ Tremont hedge fund strategy indices in September doubled from August’s reading, ending at 1,021 basis points. This compared to the 889-bp monthly average since 1994 and was one bp above August’s average since 1994.

Over September the average performance for the 7,000 hedge funds tracked by Lipper was a positive 2.42 per cent—62 bps lower than the Credit Suisse/Tremont Broad Hedge Fund Index.

Reversing the pattern to rising—after August recorded a 114.95 reading—a 72.09-percentage-point monthly performance difference in September divided the top and bottom performers of the 7,000 actively reporting hedge funds tracked by Lipper.

Merger arbitrage strategies might benefit from a pickup in M&A activity toward the end of the year.