October another strong month for hedge funds - HFR

Date: Monday, November 8, 2010
Author: Emily Chasan, Reuters

* Average hedge fund up 2.35 pct in October - HFR

* Second month in a row of gains after flat first half

* Macro strategies still performed better than most

NEW YORK, Nov 5 (Reuters) - Hedge funds reported a strong performance in October for the second month in a row, as expectations about economic growth have improved and stocks have rallied, new data showed on Friday.

The average hedge fund gained 2.35 percent in October, with most strategies seeing gains, according to Hedge Fund Research (HFR), a firm that tracks asset flows and returns in the industry.

The benchmark Standard & Poor's 500 index .SPX rose about 3.2 percent in October.

The stock market rally since September has helped most hedge funds turn a corner after seeing mostly flat returns in the beginning half of the year.

Facing another year of losses would have been difficult for the industry, which saw huge losses in 2008 and giant gains in 2009. Many funds will have to continue the trend of strong performance in the upcoming months if they hope to collect performance fees at the end of the year.

Hedge fund assets have also gotten a boost from improved market conditions as well as a series of new inflows from wealthy investors, pension funds and endowments. The hedge fund industry is now overseeing some $1.77 trillion in assets.

HFR said that macro strategies -- which have proven more nimble and easily able to adapt to global changes in currency, credit and stock markets over the last year -- were up 2.7 percent on average in October. Equity hedge funds were up 2.5 percent, and event-driven funds were up 1.7 percent in the month, the firm said.