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October 2011 Eurekahedge Report: Hedge funds Down 2.69% In September

New York (HedgeCo.net) – Hedge funds were down 2.69% in September; another month of highly volatile movements and broad declines across global markets, according to the October 2011 Eurekahedge report.

Hedge funds outperformed global equity markets again in September (-2.69% vs. -9.98% for the MSCI AC World Index) as managers focused on hedging strategies and short-term directional trades.

All regional mandates finished the month with losses but fixed income and Latin American hedge funds are still in positive territory YTD.

Managers lost more than US$37 billion in total assets through the month as investors accounted for US$20.98 billion of net outflows. Hedge funds now oversee US$1.76 trillion of capital – the lowest figure since March 2011.

The MSCI World Index lost nearly 10% making September the fifth consecutive month of declines for the index. In this market environment, hedge funds were able to outperform the markets substantially. Even so, downbeat investor sentiment resulted in net negative asset flows.

Performance-based losses for the month stood at US$16.5 billion, while the sector witnessed net negative asset flows of US$21 billion. As risk appetite declined over the last few months, investors started to pile up redemption requests amid fears of a double-dip recession and previous experience of gated redemptions in 2008 to 2009. The current size of the industry now stands at US$1.76 trillion.

Eurekahedge reports that market movements were dominated by daily swings while the broad direction remained downwards sloping through the month, creating difficult trading conditions for managers.

The MSCI World Index declined 9.98%, exhibiting the worst performance since October 2008 while the S&P GSCI Total Return Index declined by 12.17%.

Key highlights for the month of September:

· The Eurekahedge Hedge Fund Index declined 2.82% in September, the largest decline since October 2008

· Hedge funds outperformed global markets by more than 7.3%3 in September

· Total assets declined by US$37 billion in September, hedge funds witnessed net negative flows of US$21 billion

· North American CTA managers up 2.27% for September and 2.58% YTD

Short term systematic trading was the best performing strategy in September, capturing gains through declining equities and increased volatility in the FX markets.

Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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