Hedge funds outperformed underlying markets by 2.6% in November, according to index provider Eurekahedge.
However, most of the companys indices were down, including the Eurekahedge Hedge Fund Index, which was down 0.65% in November. The Index is based on 30.36% of funds, which have reported November 2011 returns as at December 8 2011. Risk aversion remained high during the month with the Euro zone debt crisis continuing to dominate investor sentiment, said Eurohedge in its preliminary report. Although the month started with gains in equity markets, mid-month trend reversals and a strong rally at months end made it a tough investment environment, it added. The MSCI World Index saw losses of 3.22%.
While most strategic mandates were loss making for the month, commodity trading adviser (CTA)/managed futures hedge funds gained 0.71% in November. Additionally, Mizuho-Eurekahedge Top 100 Index remained in the black November year to date; up 2.66%
Most regional indices finished the month in the red, with the exception of North American hedge funds, which were flat to slightly positive. The Eurekahedge North American Hedge Fund Index was the strongest performer, up 0.06% in November. After the strong rallies in October, a number of North American managers had indicated low net exposures for November to protect gains from the previous month. The S&P 500 declined 0.51% during the month.
Among other regions, Latin American and European hedge funds fared better than their Asian counterparts, with returns of -0.27% and -0.48% respectively. Similar to North American hedge funds, European hedge funds maintained low net exposures through the month, helping managers to avoid significant losses in a highly volatile environment, said Eurekahedge. Early sell-offs were triggered in the markets by the possibility of a Greek referendum. November witnessed some significant events such as changes in the Greek and Italian governments, and failure of the super-committee to reach an agreement on budget cuts, which drove the market swings. The MSCI Europe Index was down 4.96%.
Among other strategies, hedge funds investing in riskier assets witnessed the largest losses; the Eurekahedge Distressed Debt Hedge Fund Index was down 1.75% while the Eurekahedge Long/Short Equities Index lost 1.77% during the month.
(JDC)