New York (HedgeCo.net) – Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) will finish up +2.67% in September (based on 65% of assets reporting).

Long/Short Equity and Emerging Markets managers experienced another positive month driven by equity market gains in September. At the end of the best quarter since 1998 for the Dow Jones Index, which had a gain of nearly 15%, market sentiment was bolstered by several positive macro indicators, such as an increase in the Global Purchasing Managers’ Index (PMI) that signaled expanding manufacturing output and pointed to a continuing stabilization of global economic activity. Inflation continued its moderate downward trend in the U.S. and in the Organization for Economic Co-operation and Development (OECD) countries, while central banks overall maintained low interest rates in the face of a weak recovery. Many equity indices finished in positive territory, although there were some late market corrections following reports of worse-than-expected U.S. home sales.

A number of Global Macro quantitative managers had a positive month, driven by long currency trades in the Yen and Euro and decreased FX volatility. Yield curves did not move significantly and therefore front end positions had relatively little impact on performance.

Credit-oriented managers in the Fixed Income Arbitrage and Event Driven sectors had a positive month, with performance coming from mortgage-related bonds, corporate bonds (especially financials), swap spread trades (which have been normalization trades focusing on the narrowing in the spread between LIBOR rates vs. Treasuries) and opportunities in government bond auctions.

Managed Futures also had another positive month, giving the strategy its third positive month for the year, as many trend followers’ models gained traction. Equity Market Neutral managers were also up in September. The value factor contributed positively to performance while factors such as momentum detracted from performance.

Tags: global economic activity, hedge-fund-index, long short equity