Investable indexes: October 2011 returns

Equity markets rebounded in October as the eurozone crisis looked near to a resolution. This benefited hedge fund indexes, however, the rally was short-lived.

Dow Jones/Credit Suisse
The Dow Jones Credit Suisse Hedge Fund Index rebounded from September losses to start the fourth quarter up 1.73%. Long/short equity was the best performing sector, finishing up 4.45% for the month, while emerging markets gained 3.70%. Conversely, the dedicated short bias sector was the worst performer, declining 9.59% in October. However, the strategy remains up 2.34% year-to-date.

Frontier Multi Asset Platform (Map) Fund
The Frontier Multi Asset Platform (MAP) returned 3.2% in October, having recorded negative returns (1.9%) in August. Emerging markets had the strongest performance, gaining 13.2%, followed by real estate with an 11.8% increase. Global equities also performed well, up 10.3% in October. Commodities gained  7.2% in the month. The worst-performing asset class was managed futures, which fell 3.7% in October, followed by global fixed income which lost 0.1%. Over the five years to October 2011, the MAP strategy has generated annualised returns of 0.6% with volatility of 9.8%. MAP is an investable fund tracking eight global asset class indices, using an asset allocation inspired by US university endowments such as Harvard and Yale.

HFRX
Financial markets posted strong gains in October as equity markets recovered from two months of sharp declines with broad market advances led by strength in small cap, energy and technology sectors. Hedge funds had gains with contributions from equity hedge and event driven strategies. The HFRX Global Hedge Fund Index gained 0.81% in October. Event driven strategies had the strongest contribution to index performance with the HFRX Event Driven Index gaining 2.1% for the month. All event driven sub-strategies posted gains on tightening credit, broad equity market gains and tightening risk arbitrage spreads. Equity Hedge funds also had a significant positive contribution to index performance, with the HFRX Equity Hedge Index gaining 1.36%. The HFRX Relative Value Arbitrage Index gained 1.16%, as credit tightening and energy infrastructure exposure was only partially offset by falling volatility and rising treasury yields.

Lyxor
The Lyxor Global Hedge Fund index was up 0.8% in October as markets breathed a huge sigh of relief on news of a possible resolution to the European debt crisis. The rush to the safe haven of US Treasuries was reversed at the start of the month and a simultaneous rally in commodities and equities was ignited. The euro benefited at the expense of the US dollar. However, the jubilant feeling faded towards the end of the month and risk assets lost ground. The Lyxor Long-Term CTA Index declined 3.0%. Some of the more active managers were able to catch the trend reversal better and the Lyxor Short-Term CTA Index declined 1.1%. Event driven managers generally benefited from October’s relief rally and the Lyxor Special Situations Index gained 3.8%. Financials gained over the month and spiked sharply at month end, the Merger Arbitrage Index gained 1.5%, with spreads tightening noticeably during the end of month rally. Credit spreads narrowed throughout October, the Lyxor L/S Credit Index gained 1.4%. The Fixed Income Arbitrage Index gained a solid 2.9%, partially due to the gains of mortgage-focused managers. Equity-focused managers generally experienced a quiet month, the Lyxor L/S Equity Variable Bias Index declined 0.2%. The Lyxor index that posted the strongest gains (5.6%) was the L/S Equity Long Bias Index.