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Tech, Energy Propel Hedge Funds’ September Gain: HFR

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Hedge funds concluded the third quarter on a strong note, up 3%, Hedge Fund Research reported Friday.

The HFRI Fund Weighted Composite Index gained 0.6% in September, posting its seventh straight positive monthly performance and bringing its year-to-date gain to 4.2%.

Equity hedge strategies led the hedge fund sector’s performance in September, as global equity markets posted mixed or flat performance. The HFRI Equity Hedge Index returned 1.1%, ending the quarter up 4.7%. Year to date, the index has gained 4.2%, recovering from declines early in the year.

Specialized technology, healthcare and energy exposures drove the gains. The technology/healthcare sub-strategy posted its strongest monthly performance in six years, up 4%, to lead all sub-strategies in Q3 with a gain of 7.6%.

The volatile energy/basic materials sub-strategy added 1.5% in September to end Q3 up 7.3%. It leads all strategies for the first nine months of the year with a 19% return.

The HFRI Event-Driven Index also advanced for September, gaining 0.7% in the month, closing Q3 up 4.4% and leading all main strategies with a year-to-date 6.7% return.

Event-driven sub-strategy performance was driven by distressed/restructuring, which advanced 1.3% in September, bringing performance to 9.5% for the year to date. The activist sub-strategy fell by 0.5% for the month, but is still up 4.5% for the year.

“With equity markets near record highs, expectations for near-term U.S. rate increases and U.S. election uncertainty dominating the coming months, HFRI performance, especially in event-driven and equity hedge sub-strategies, is likely to top equity markets for FY 2016,” HFR President Kenneth Heinz said in a statement.

The fixed income-based HFRI Relative Value Index ended September up 0.9%, as the U.S. Federal Reserve maintained interest rate policy while investors positioned for near-term rate increases. The monthly gain brought Q3 performance to 3.1% and the year-to-date return to 5.9%. The volatility sub-strategy led September performance with a 1.6% gain.

Macro hedge funds reported mixed performance across currencies and commodities for September, as the HFRI Macro Index declined by 0.3%, paring the gain for the first nine months of 2016 to 1.8%.

The HFRI Currency Index led macro sub-strategy declines, losing 1% in the month. At the same time, the HFRI Commodity Index advanced 1.1%, bringing the year-to-date return to 5.8%.   Both CTA and discretionary macro strategies reported mixed performance for the month. The HFRI Systematic Diversified Index fell by 0.7%, while HFRI Macro: Discretionary Thematic Index gained 0.1%.

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