CHICAGO, (October 7, 2011) – Hedge funds ended the volatile 3Q11 with the HFRI Fund Weighted Composite Index posting a decline of -2.8 percent for the month of September, bringing losses for the quarter to -5.5 percent. The quarterly performance decline was the fourth worst in industry history, trailing only 3Q and 4Q 2008 and 3Q 1998.
Losses were widespread across industry strategies and regions, with Equity Hedge and Emerging Markets posting the steepest declines. The HFRI Equity Hedge Index fell by -4.9 percent in September, ending the quarter with a decline of -9.6 percent with negative contributions from most sub-strategies; the HFRI EH: Energy/Basic Materials Index posted a steep decline of -9.5 percent in September, while Fundamental Growth strategies losing -6.1 percent.
The lone Equity Hedge sub-strategy to post a gain in September was dedicated Short Bias funds, which gained +6.9 percent, the fifth consecutive monthly gain. Emerging Markets funds posted a decline of -7.4 percent in September and over -12.1 percent in 3Q. The weakest regional areas of performance were Emerging Asia, Russia/Eastern Europe and Latin America, each of which declined by over -9.0 percent in September. Event Driven strategies also posted sharp losses for September, with the HFRI Event Driven Index declining -3.3 percent, including negative contributions from Distressed and Special Situations funds.
Losses were less pronounced across Relative Value and Macro strategies with positive contributions from US dollar strength and falling yields only partially offsetting equity, credit and commodity sensitive declines. The HFRI Relative Value Index declined by -1.2 percent, with negative contributions from sovereign fixed income and real estate focused sub-strategies. Inclusive of September losses, Relative Value has now posted a narrow decline of -0.17 percent YTD 2011. The HFRI Macro (Total) Index declined by -0.4 percent for September; despite the sharp reversal in widely held gold positions, systematic trend following sub-strategies posted a gain of +0.2 for the month, the third consecutive month of positive returns.
“Intense volatility negatively impacted nearly every area of financial markets and the hedge fund industry in September, as weakness was both pervasive and widespread,” said Kenneth J. Heinz, President of HFR. “Hedge fund managers and investors continue to maintain a critical focus on risk and financial market liquidity, as well as the far reaching impacts of the ongoing European sovereign debt crisis. In the current environment, fund managers are positioning for continued volatility and opportunities created by dislocations across asset classes.”
HFR (Hedge Fund Research, Inc.) is the global leader in the alternative investment industry. Established in 1992, HFR specializes in the areas of indexation and analysis of hedge funds. HFR Database, the most comprehensive resource available for hedge fund investors, includes fund-level detail on historical performance and assets, as well as firm characteristics on both the broadest and most influential hedge fund managers. HFR has developed the industry’s most detailed fund classification system, enabling granular and specific queries for relative performance measurement, peer group analysis and benchmarking.
HFR produces over 100 indices of hedge fund performance ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus. With performance dating back to 1990, the HFRI Fund Weighted Composite Index is the industry’s most widely used standard benchmark of hedge fund performance globally.
The HFR suite of Analysis Products leverages the HFR Database to provide detailed, current, comprehensive and relevant aggregate reference points on all facets of the hedge fund industry. HFR also offers consulting services for clients seeking customized top-level or more nuanced analysis. For the hedge fund industry’s leading investors and hedge fund managers, HFR is The Institutional Standard.