NEW YORK (HedgeWorld.com)–Hedge funds tracked by Morgan Stanley Capital International returned -0.3% in September, resulting in year-to-date performance of 1.3%, based on initial estimates.

The best performing “process group” tracked by MSCI in September was the directional trading category, which returned 3.3% in the month, and 12.6% year-to-date through September. That group includes global macro, futures funds and tactical asset allocation funds.

Specialist credit funds, such as distressed and long/short credit, returned 0.5% in September and 1.6% the first three quarters of the year, according to MSCI. Relative value funds–merger arbitrage, statistical arbitrage and other arb strategies–returned 0.4% in September and 4.4% year-to-date.

Security selection funds as a group had another tough month, losing 2.1% in September and 4.2% year-to-date through September. That group includes long/short equity, market neutral and short-biased funds.

Funds in a catchall process group category called multi-process returned -1.6% in September and -1.3% year-to-date through September.

Despite the weak absolute performance, relative to equity markets, hedge funds still look good. The Standard & Poor’s 500 stock index was down 11% in September and 28.99% year-to-date. The MSCI World Index returned -11.1% and -26.4% in the same respective periods.

The broad MSCI hedge fund results are close to the results of the CSFB/Tremont Hedge Fund Index,* which reported returns of 0.08% for September and 0.9% year-to-date through Sept. 30.

*Tremont Advisers Inc., Rye, N.Y, is a minority investor in, and strategic partner of, HedgeWorld.com.