Based on 69% of returns received the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”) is going to finish down approximately 0.71% in November.
Managed Futures was the best performing sector in the Broad Index, finishing the month up an estimated 3.21% (with 90% of funds reporting). Dedicated Short Bias, Equity Market Neutral and Global Macro also showed positive performance.
Downward trends in US Treasury yields, commodity and currency markets led to positive performance for the Global Macro and Managed Futures sectors and helped mitigate the losses from other sectors. While several sectors capitalized on the month-end equities rally in which the S&P saw its largest weekly gain since 1974, the move does not appear to have been a main driver of performance due to its short duration.
The continued commodities bear market benefited the Global Macro and Managed Futures sectors as short positions in the commodities sector led to gains for the month. Oil prices dropped below $50 a barrel from October highs, and were down almost $100 a barrel from previous levels this summer.
Yields on 10-Year Treasury Bonds dropped to record lows, falling below 3% in November. Some analysts currently forecast a further decline in yields if the U.S. Federal Reserve lowers interest rates in December as expected. If Federal Reserve efforts to improve market conditions by providing liquidity for asset-backed securities through the Term Asset-Backed Securities Loan Facility (TALF) are successful, a possible investment shift from treasuries to other securities could begin to create opportunities in the Relative Value sectors as well.
L.D.