Hedge funds: October was worst month in 7 years

Hedge funds suffered their worst month in October in seven years as equity strategies were hit by a sell-off in technology stocks. Hedge Fund Research’s index that tracks all strategies was down about 3 per cent, its worst monthly decline since September 2011, the data provider said. That brings the index’s performance to negative 1 per cent for the year. HFR’s equity hedge fund index fell 4.25 per cent in October — its worst performance in nearly three years — while the index that tracks funds that invest in technology stocks fared the worst, with a decline of 4.7 per cent.

Those strategies weren’t even the worst performers for the month. That title went to HFR’s index that tracked funds that invest in energy stocks, which was down just over 8 per cent for October. Meanwhile, the activist index was down 5.43 per cent, and the macro active trading index was down 6.5 per cent.

“Financial market volatility spiked in October as global equity markets experienced a violent reversal, with many entering correction territory in only several weeks, contributing to the worst month of performance for the hedge fund industry in seven years,” said Kenneth Heinz, the president of HFR. Dispersion between the best- and worst-performing hedge funds also widened, with the top tenth returning 6.6 per cent and the bottom 10 per cent falling 13.7 per cent, HFR found.

Only a quarter of hedge funds were positive for the month. “Anticipating the market volatility which began in September and accelerated in October will continue into 2019, strategies positioned for this transitional market environment are likely to lead performance through year end,” Mr Heinz said.