According to the recently released data by Hedge Fund Research Inc., hedge funds returned a global average of 1.98% in October, but managers still failed to keep pace with gains by the Standard & Poor’s 500 index and average returns fell short.
Because hedge funds typically use leverage/gearing or debt to invest, the positions they can take in the financial markets are larger than their assets under management. The number of hedge funds increased 10% during the past year to reach around 9,000 according to HFR.
Hedge funds have returned 9.22% in 2006 through last month, compared with a 12.1% increase including dividends by the S&P index. Hedge funds attracted $44.5 billion from wealthy investors and institutions in the third quarter, the most in one quarter since at least 2003.
Event-driven managers in the HFR indexes earned 1.73% in October, pushing their year-to-date return to nearly 11%. Convertible bond specialists earned 1.34% in October and can claim 10-month returns of 12.31%.
Funds of funds tracked by HFR returned 1.56% last month and are up 6.4% on the year.
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