The EQUITIES Hedge Fund Index:
Hedge Fund Commentary Download PDF 
The EQUITIES Hedge Fund
Index posted another good
return in September, advancing
+3.81% for the month.
Liquidity returned to the markets,
helped by the Fed’s rate cut, and the
Dow Jones Industrial Average and S&P 500
both made impressive gains to reach alltime
highs. Overall, hedge fund performance
for the month was comparable to that
of the stock market, while for the year-to-date,
hedge funds as a group have outperformed
the stock markets with lower volatility.
The majority of hedge funds in the
EQUITIES Hedge Fund Index reported
strong positive returns for the month.
Long/short equity and global macro managers
particularly contributed to the good
numbers, while some arbitrage strategies,
although positive, underperformed due to
continuing difficulties in the fixed income
and credit markets.
Global Macro managers have posted excellent
returns for September and for the
year-to-date, as Asian markets continued to
demonstrate outstanding performance. As
of month-end, China’s markets were up
over 100% for the year. Managers continued
to profit from short dollar positions as
the U.S. currency’s decline persisted, reaching
an all-time low against the euro and enduring
more losses against countries with
strong commodity components to their
economies. Long commodity positions
generated significant gains for macro managers
as commodities continued their advance
to record highs, partially fueled by the
dollar’s weakness. Gold surged 11% for
the month, and oil passed $83 per barrel.
Long/short equity funds continued their
good performance, gathering profits not
only from the returns of the markets, but
from stock selection on both long and short
positions. Technology stocks have been
excellent holdings for funds as earnings estimates
have been revised upwards and
overseas revenues have been boosted by
the declining dollar. In fact, companies
with large international operations have
been a major driver of the markets this
year. Banks and other financials are not in
such good shape. The credit crisis and
mortgage problems have severely hurt both
commercial banks and brokerages. Hedge
fund managers benefitted from short positions
in the financial sector.
Among other hedge fund trading styles,
distressed managers profited as bond prices
moved up to 200 basis points higher following
the Fed’s rate cut; however, credit
strategies have still not fully recovered from
their losses during the summer. Fixed income
arbitrage managers have shown a
wide spread of performance recently, with
individual returns being sensitive to each
manager’s ability to exploit the recent credit
turmoil. Most arbitrage managers were
profitable in September. Convertible managers
also had a good month and recovered
much of their earlier losses, and are now
ahead 3-4% for the year. New issuance for
2007 is already ahead of 2006’s total.
Merger arbitrage managers performed well,
as several profitable high-profile deals closed
during the month.
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