The Average U.S. Hedge Fund earned 0.9% net in October, according to Van Hedge Fund Advisors International, Inc. (VAN), a global hedge fund advisory firm. Offshore domiciled hedge funds also staged a modest rebound, averaging a 0.5% return net of fees. Those gains place the year-to-date returns for the Average U.S. Hedge Fund and the Average Offshore Hedge Fund at ?2.8% net and ?1.4% net, respectively. Nearly 60% of hedge funds reported a positive October return.

Hedge funds lagged behind stocks during October?s market rally but they continue to beat the major benchmarks for the year to date. Even after rising 8.8% last month, the S&P 500 is still down ?21.8% for the year through October. Likewise, mutual funds also have performed less well than hedge funds this year. The Average Equity Mutual Fund has lost ?20.8% for the year to date through October, compared to just ?2.8% for the Average U.S. Hedge Fund.
Overall, half of the hedge fund strategies in the Index made gains in October. The best performing strategies for the month were U.S. Several Strategies, U.S. Emerging Markets and U.S. Value, which posted net gains of 8.6%, 2.8% and 2.2%, respectively. For the year to date through October, the top performing strategies were U.S. Short Selling, 31.8% net; Offshore Short Selling, 24.6% net; and U.S. Emerging Markets, 8.8% net.

Not surprisingly, Short Selling and Income were among the worst performing hedge fund strategies in October as the equity markets rallied and bonds fell. U.S. Short Selling lost ?3.8% net while U.S. Income fell ?1.5% net. While shorting stocks and investing in non-equity securities may have been drags on hedge fund returns last month, they have been important contributors to hedge fund success in recent years, helping hedge funds achieve higher returns with less volatility than many other investment vehicles.

    Van Hedge Fund Advisors International, Inc.                                                    www.hedgefund.com