Hedge funds declined in October but outperformed broader market indices, according to data collected by J.P. Morgan Prime Brokerage.
In its monthly trend report for October, J.P. Morgan found that the HFRI Global Hedge Fund Index decreased by -0.49%. Relative value was the best performing hedge fund strategy in October, with gains of +0.55%. Despite a decline in most equity indices, the HFRI Equity Hedge Index gained +0.16% in October. Market neutral was a key driver for equity-biased managers, as theHFRI Equity Market Neutral Index increased +0.70%. Global macro funds declined -2.19% in October, bringing their year to date performance to -1.33%.
On securities lending, the U.S. Prime Brokerage portfolio ended October net covered as clients remained unwilling to add meaningful short exposure. In contrast to most sectors, technology was heavily shorted in October. In Europe, directional trades across several sectors remained crowded, particularly Financials. Deal activity was light with some new flows from convertible bond offerings.
Elsewhere, the gross return of the SS&C GlobeOp Hedge Fund Performance Index for October 2012 measured 0.13%. Hedge fund flows as measured by the SS&C GlobeOp Capital Movement Index advanced 0.54% in November.
Overall capital activity remains consistent with previous years as hedge funds enter the last quarter with positive capital flow, said Bill Stone, Chairman and Chief Executive Officer, SS&C Technologies.
The SS&C GlobeOp Hedge Fund Performance Index is an asset-weighted, independent monthly window on hedge fund performance. On the ninth business day of each month it provides a flash estimate of the gross aggregate performance of funds for which SS&C GlobeOp provides monthly administration services on the GlobeOp platform.
Since its inception, the correlation of the SS&C GlobeOp Performance Index to many popular equity market indices has been approximately 25% to 30%. This is substantially lower than the equivalent correlation of other widely followed hedge fund performance indices.
The SS&C GlobeOp Capital Movement Index represents the monthly net of hedge fund subscriptions and redemptions administered by SS&C GlobeOp on the GlobeOp platform. This monthly net is divided by the total assets under administration (AuA) for fund administration clients on the GlobeOp platform. Cumulatively, the SS&C GlobeOp Capital Movement Index for November 2012 stands at 148.94 points, an increase of 0.54 points over October 2012. The Index has advanced 9.48 points over the past 12 months. The next publication date is Dec. 13, 2012.
(JDC)