The Eurekahedge Hedge Fund Index was down 1.51%1 in October, supported by the robust performance of the global equity market as represented by the MSCI ACWI (Local) which returned 4.61% over the same period. Global equity markets shrugged off concerns over enduring inflation pressures to make further upward progress, buoyed by strong corporate earnings, the continuation of accommodative monetary policy and pickup in economic activity in major economies. The S&P 500 recorded its best month of the year with a gain of 6.91% while the NASDAQ Composite and DJIA posted similar strong returns of 7.27% and 5.84% respectively. Nevertheless, the persistent inflation has placed upward pressure on interest rates with the US 2-year Treasury rising by 22bp and the 10-year rising by 7bp to finish the month at 0.50% and 1.56% respectively as markets priced in a tightening of financial conditions. The Fed announced that it will soon begin tapering its monthly bond purchases later in November at a pace of US$15 billion each month from the current US$120 billion a month that the Fed is purchasing. Over in Europe, returns were positive among equity benchmarks in the region with the Euro Stoxx 50, CAC 40 and DAX up 5.00%, 4.76% and 2.81% respectively. The European Central Bank kept policy unchanged at the October ECB meeting as it continues to see the current inflation overshoot as temporary, supporting investor sentiment in the region.
Returns were mixed across geographic mandates in October with North American hedge funds leading the group with a return of 2.36% while Latin American hedge funds trailed behind their regional peers with a return of -3.67%. Across strategies, CTA/managed futures and event driven outperformed their strategic peers with returns of 2.41% and 2.23% respectively throughout the month.
Roughly 67.8% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in October, and 36.7% of the hedge fund managers in the database were able to maintain a double digit return in 2021.
Figure 2 illustrates the 2021 performance of hedge fund managers across regions. As of October year-to-date, most of the geographic mandates have recorded positive returns with Latin America the only exception. Global hedge funds registered their best October year-to-date return since 2009 with a return of 9.81%, supported by the strong performance of the MSCI ACWI (Local) which has returned 17.23% over the same period. North American hedge funds outperformed their regional peers with a return of 13.78%, followed closely by European hedge funds which returned 8.48%. At the other end of the spectrum, Latin American hedge funds lagged the group with a return of -4.11%.
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