The Hennessee Hedge Fund Index was down 5.5% in October, less than other hedge fund indeces had predicted. The Barclay Hedge Fund Index, which tracks a slightly different basket, was earlier looking for a 6% + decline in October.
The 5.5% drop in October, was actually a slowing in the pace of declines. The Heennessee Hedge Fund Index was down more than 6.2% in September and is now down more than 15% ytd.
Ironically, the biggest declines were in hedge fund strategies that are typically viewed as being more market neutral such as convertible arbitrage (though this strategy can be highly correlated if managers are net long convertibles) which lost more than 10% in October. The smallest declines came from merger arbitrage (down less than 1%) and the international index (down 4%). The long-short index was down more than 5% for the second straight month, again bringing into question why long-short hedge fund managers have returns that are so highly correlated with long only portfolios.