Hedge Funds Benefit From Stock and Bond Market Rally in September

The Morningstar MSCI Composite AW Hedge Fund Index rose 1.6% in September, along with global stock and bond markets.

The Index, an asset-weighted composite of nearly 1,000 hedge funds in the Morningstar Hedge Fund database, has increased 5.0% for the year through September.

“Hedge funds benefited from September’s stock and bond market rally,” AJ D’Asaro, fund analyst at Morningstar, says. “Favorable macroeconomic data, a tentative compromise with Syria, and the postponement of tapering by the U.S. Federal Reserve allowed hedge funds to advance above and beyond last month’s declines.”

Long-biased equity strategies profited the most from the Federal Reserve’s decision. The Morningstar MSCI North America Hedge Fund Index increased 2.0% for the month, and 4.1% for the third quarter of 2013, as the S&P 500 reached all-time highs. Similarly, the Morningstar MSCI Small Cap Hedge Fund Index, which represents small-cap long-short equity strategies, rose 3.5% in September, while the Russell 2000 Index spiked 6.4%.