Equity hedge leads hedge fund gains in November

Date: Thursday, December 9, 2010
Author: Emily Perryman, HedgeWeek

With a strong contribution from equity hedge strategies, hedge funds posted a gain for November, with the HFRI Fund Weighted Composite Index up 0.26 per cent.

Sovereign credit risk was again a focus for investors in the month of November, as the leaders of the EU worked to provide financial assistance to member countries struggling with outstanding sovereign obligations and sovereign spreads rose sharply.

The Euro declined for the month, along with most other major currencies, as investors moved into US dollar denominated assets.

Equity markets generally posted modest declines, though with some dispersion as Japan rose while European markets fell. Capital markets were open to new public offerings, with a notable issue from GM coming to market in November.

The HFRI Equity Hedge (Total) Index gained 1.09 per cent, with a strong contribution from energy and basic materials strategies which gained 5.20 per cent in November, adding to October’s 4.05 per cent gain and bringing YTD performance to 12.26 per cent. Equity hedge gains were broad-based across other sub-strategies, with quantitative directional, fundamental growth, fundamental value and equity market neutral all having significant positive contributions. Detracting from the positive EH performance, sector technology funds posted a narrow loss for the month of 0.39 per cent, while short bias funds declined 4.50 per cent.

Macro funds were the weakest area of hedge fund performance in November, offsetting October’s gain with a decline of 0.92 per cent for the HFRI Macro (Total) Index. Losses were distributed across both systematic and discretionary strategies, with the lone area of positive contribution from commodity focused funds.

The HFRI Relative Value (Total) Index posted a gain of 0.37 per cent, pushing the YTD gain of in relative value strategies to 10.21 per cent. Credit focused strategies posted gains even as yields rose, with a strong contribution from fixed income: asset backed strategies, which gained 1.37 per cent; convertible arbitrage and fixed income: corporate posted gains of 0.23 per cent and 0.12 per cent, respectively. Yield alternative strategies posted a partially offsetting decline of 0.67 per cent, with weakness in real estate and infrastructure components.

The HFRI Event Driven (Total) Index posted a gain of 0.26 per cent, as gains in M&A, activist, new issuance and equity special situations exposures were offset by losses in credit-oriented strategies.