Hedge funds mark longest period of decline since crisis

Decline2Hedge fund performance declined for the fourth consecutive month in September, as global equities, commodities and high yield credit posted large losses.

Yet hedge funds still managed to beat the S&P 500, according to data from HFI, which compiles the HFRI Fund Weighted Composite Index.

The index was down by 1.1% – the fourth consecutive decline and the longest sustained fall for hedge fund performance since 2008’s financial crisis. Since June, performance fell 5.5% by the end of September, and 1.3% year-to-date.

However, based on the index, hedge funds still outperformed the S&P 500 by 500 basis points and the Dow Jones Industrial Average by 700 basis points.

September’s declines were led by equity and credit-sensitive event-driven strategies, with the HFRI Event Driven Index posting a decline of 2.5%, led by exposure to positions in commodities firm Glencore, pharma company Valeant and high yield credit. Over four months, event-driven strategies saw a drawdown of 7%, and 2% year-to-date.

The HFRI Equity Hedge Index fell by 1.7%.

Funds with exposure to uncorrelated macro strategies partially offset declines across many directional strategies in September, with the HFRI Macro Index advancing 0.4%, although this did not make up for the losses in other hedge fund strategies.

“Funds which have positioned for macroeconomic uncertainty and market volatility are expected to attract interest from investors looking to access alternative equity and credit exposures,” says Kenneth Heinz, president of HFR.

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