HFR: Hedge Funds Notch 12th Consecutive Monthly Gain In October

Nov 8 2017 | 10:35pm ET

A strong rebound in quantitative CTA strategies pushed one of the broadest measures of the hedge fund industry to its twelfth consecutive month of positive returns and its best tally since January.

The HFRI Fund Weighted Composite Index, gained +1.3% in October, according to Hedge Fund Research, increasing its gain so far this year to +7.2%. The firm’s HFRI Asset Weighted Composite Index, meanwhile, gained +2.14% - the best performance of the year - and sits +6.65% YTD. 

Highlights from HFR’s monthly performance update:

  • Gains were led by trend-following Macro CTA strategies, HFR said in a statement, as the HFRI Macro: Systematic Diversified Index surged +4.0% for the period, the strongest monthly return since January 2015. Prior to October, CTA strategies had experienced mixed performance over an intermediate timeframe, with the index down -2.3% YTD entering October and posting narrow declines in each of the prior two calendar years. The October gain brings YTD performance to +1.6%. Returns in CTA strategies were driven by exposures across asset classes, including equities, commodities, and fixed income. 
  • The HFRI Macro (Total) Index advanced +2.5% in October, the strongest month since December 2010, reversing a narrow YTD decline and bringing the YTD return to +2.4%. Sub-strategy CTA gains were complemented by the HFRI Macro: Multi-Strategy Index, which added +1.6% for the month. 
  • Risk Parity strategies reversed their narrow declines from the prior month, and extended strong 2017 performance. The HFR Risk Parity Vol 10 Index gained +2.7% in October, bringing the YTD return to +11.4%, while the HFR Risk Parity Vol 15 Index surged +4.1%, advancing YTD performance to +16.9%. 
  • Equity Hedge strategies also posted solid gains in October, driven by strong earnings in technology. The HFRI Equity Hedge (Total) Index advanced +1.0% for the month, bringing YTD performance to +10.7%. EH was led by the HFRI EH: Technology Index, which jumped +2.9% in October, bringing YTD performance to +16.3%, leading all HFRI sub-strategies. Quantitative equity strategies also experienced strong returns for the month, as the HFRI EH: Quantitative Directional Index climbed +2.0%. The HFRI Equity Hedge (Asset Weighted) Index jumped +2.0%. 
  • The fixed income-based HFRI Relative Value (Total) Index advanced +0.4% in October, bringing YTD performance to +4.3%. RVA sub-strategies were led by the HFRI Volatility Index, which gained +0.9% and the HFRI Convertible Arbitrage Index, which added +0.7%. For the year, the HFRI Asset-Backed Index leads all RVA sub-strategies with a +7.1% YTD return. 
  • Event-Driven strategies produced mixed performance in October, with gains in equity and M&A strategies nearly offset by declines in credit-sensitive distressed funds. The HFRI Event-Driven (Total) Index posted a narrow gain of +0.1% for the month, though the HFRI Event-Driven (Asset Weighted) Index produced a slightly higher return of +0.5%. ED sub-strategy performance was led by the HFRI ED: Special Situations Index, which returned +0.7%. The HFRI ED: Distressed Index declined -0.7% in the period. 

"Quantitative, trend-following strategies surged in October, driven by contributions across all major asset classes including equities, commodities, fixed income and currencies, as these reversed what had been a challenging environment not only in 2017, but also in the prior two years," stated Ken Heinz, president of HFR, in a statement. "Risk Parity strategies also extended gains in October, though in contrast to trend-following strategies, [they] have posted strong performance in both 2017 and the prior year.

“Shifting patterns in geopolitical and financial market risks have created opportunities for hedge fund managers, and it is likely that these dynamic strategies will lead industry growth and performance into 2018,” he added. 

Established in 1992, HFR is a global leader in specializing in the indexation and analysis of hedge funds. The company produces the HFRI, HFRX and HFRU Indices, industry benchmarks for global hedge fund performance, and calculates more than 100 indices ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus.


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