Narrow gains as hedge funds outperform equities in October

Hegde funds posted positive returns in October amid investment uncertainty around the US presidential election and new COVID-19 lockdowns in Europe. Equity hedge strategies led the performance of the industry with gains that were inversely correlated to sharp equity market declines, according to Hedge Fund Research (HFR).

The HFRI Fund Weighted Composite Index gained 0.4% for the month, partially offsetting a September decline.

Event-driven strategies also advanced in October. Led by merger arbitrage and distressed sub-strategies, they topped the global equity market declines.

Fixed income-based relative value arbitrage posted a narrow gain for the month as interest rates increased.

Macro strategies, in turn, had a mixed performance in the uncertain macroeconomic and geopolitical environment as gains in commodity strategies were offset by declines in currency strategies.

Crypto asset funds surged by 10.2% in October based on strong bitcoin gains.

During the third quarter, investors poured new capital into hedge funds with a net inflow of $13 billion that brought the total industry capital to $3.31 trillion, HFR reported.

The Eurekahedge Hedge Fund Index was down 0.16% in October 2020, but outperformed the global equity market, such as the MSCI ACWI (Local) index, which lost 2.29% over the same period.

Roughly 46.6% of the funds in the Eurekahedge Hedge Fund Index posted positive returns last month, and 22.6% of the hedge fund managers in the database were able to maintain double-digit returns over the first 10 months of 2020.

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