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HEDGE FUND INDUSTRY GLOBAL NEWS ROUND-UP • RESEARCH • ABSOLUTE UCITS • DATA

Global

Brieﬁng

Volume 3 Issue 12 October 2010 A HedgeFund Intelligence publication

geFun

Intelligence

September ushers in a reversal of fortunes

GLOBAL SUMMARY

September saw a reversal of August’s bearish sentiment, whena constant ﬂow of poor macroeconomic data had dominated thenews, escalating investors’ fears of a double-dip recession andcausing an over-zealous sell-off.Despite September’s generally subdued economic data, it was far from indicating a return to recession like the previousmonth, as US data stabilised, calming recent fears. Markets weresupported further by comments from the Federal Reserve and theBank of England, which signalled a willingness to provide furtherstimulus, if needed, with a second round of quantitative easing.The economic outlook also improved for emerging markets,particularly China, which saw an increase in imports and a rise inits industrial production that surpassed expectations, indicatingthat it was over the recent slowdown and reaccelerating.Hedge fund managers had one of their best months in recent years with the HedgeFund Intelligence Global Index – Compositeup 2.20% and HedgeFund Intelligence Global Index – Equityup 3.28%. Unlike August, when markets fell, September sawmanagers underperform the surge in local bourses, with the S&P500 gaining almost 9%, and the FTSE (up 6.19%), DAX (up 5.13%),Nikkei (up 6.18%), Hang Seng (up 8.87%) and MSCI The WorldIndex – Net (up over 9%) all gaining.Currencies became a hot topic again last month as growingemerging economies saw inﬂows strengthening their currencies, Japan move defensively to suppress the yen and an increase inrhetoric from the US over the value of the Chinese renminbi.

CONTENTS

1 Global summary3 The Americas summary

Equities boast best September since 1939

4 Europe summary

Hope returns as double-dip concerns fade

5 Asia-Paciﬁc summary

Asian markets rebound with positive returns

6 Funds of funds summary

Commodities and equities perform the best

8 Absolute UCITS

Latest UCITS III developments

9 Research

Global hedge fund assets edge up to $1.87 trillion

11 Data

Absolute UCITS continues to attract funds

12 Latest weekly news For more information please contact:

Damian Alexander

: dalexander@hedgefundintelligence.com

tel:

+44 (0)20 7779 7361

Medians MeansStrategy Sep-10 YTD Sep-10 YTD

Equity 3.28% 2.31% 3.87% 3.59%Macro 1.64% 4.56% 2.72% 4.65%Managed Futures 2.20% 3.83% 3.41% 5.95%Event Driven 2.41% 5.25% 3.92% 6.32%Emerging Market Debt 1.79% 8.16% 1.96% 10.32%Emerging Market Equity 4.89% 3.61% 5.65% 5.53%

HFI Global Composite 2.20% 4.11% 3.11% 4.93%

GLOBAL INDICES (EST)

%MSCI World Index - NetHedgeFund Intelligence Global Index - MacroHedgeFund Intelligence Global Index - Managed FuturesHedgeFund Intelligence Global Index - Event DrivenHedgeFund Intelligence Global Index - EquityHedgeFund Intelligence Global Index - Emerging Market EquityHedgeFund Intelligence Global Index - Emerging Market DebtHedgeFund Intelligence Global Index - Composite-50050100150200250300350

S e p - 1 0 S e p - 0 9 S e p - 0 8 S e p - 0 7 S e p - 0 6 S e p - 0 5 S e p - 0 4 S e p - 0 3 S e p - 0 2 S e p - 0 1 S e p - 0 0 S e p - 9 9 S e p - 9 8

Global

Brieﬁng

is a free monthly publication

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GLOBAL COMPOSITE MEDIAN INDICES

November 2

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AR Symposium ad.indd 120/09/2010 09:47

Equities boast best September since 1939

Covering the single manager hedgefund industry in the Americas

HEDGE FUND STRATEGIES

Equities

Despite September’s mixed macro-economic data, investorsgrew more conﬁdent as fears of a double-dip recession receded andthere was raised expectation of a further round of quantitative easing bythe Federal Reserve. Gains were made in corporate bonds and dividendpaying equities, while funds with conservatively positioned portfolios were unable to take advantage of the rally in equities, as stock pricessoared and the S&P 500 Index returned its best September in 71 years,ending up 8.76%. US and Global Equity funds returned an estimated4.07% and 2.34% respectively, while Tech funds returned an estimated3.44%. Managers expect the November elections to inﬂuence the markets,and are conservatively hedging portfolios to prepare for higher volatility.

Convertible and Equity Arbitrage

Convertible funds were up 1.09%bringing the year to date to 6.56%. Funds that performed well found thesurge in the equity markets led to outrights being better buyers, whileinvestors anticipated new issuance. Year-to-date performance is downcompared to the same time last year, when funds were up 41%, accordingto the Absolute Return Convertible & Equity Arbitrage Index; managersthus remain cautious on convertibles, but are adding opportunistically.

Credit

Funds within the Credit space returned an estimated 1.70%for the month, gains being made through long positions in bonds andCDS. Short positions in Brazilian indices and Chinese banks contributedto losses. Managers are targeting bonds with reﬁnancing potential andsee an opportunity in high-quality loans and reﬁnance candidates.

Commodities/CTAs

Commodity-based funds and CTAs returned2.82% and 2.21% for the month respectively. Following the JapaneseGovernment’s intervention in the yen, many portfolios saw a reductionin their long yen exposure to the US dollar to combat the increase incurrency volatility. In the commodities market, gains were made fromlong positions in gold and silver as the continued weakness of the USdollar led investors to seek a safe haven in the precious metals market.

Medians MeansStrategy Sep-10 YTD Sep-10 YTD

Mixed Arbitrage Index 0.89% 4.38% 0.67% 4.78%Commodities Index 2.82% 1.00% 3.94% 3.52%Convertible & Equity Arbitrage Index 1.09% 6.56% 1.68% 7.85%Credit Index 1.70% 8.61% 2.13% 10.96%Distressed Index 1.60% 8.06% 1.44% 8.29%Event Driven Index 3.56% 8.07% 4.55% 7.37%Fixed Income Index 0.93% 7.68% 1.22% 8.09%Global Equity Index 2.34% 2.17% 3.25% 2.90%Latin American Debt Index 1.66% 5.84% 1.61% 5.82%Latin American Equity Index 2.93% 7.00% 3.47% 8.67%Macro Index 2.77% 5.92% 3.79% 6.31%Managed Futures Index 2.21% 4.06% 3.48% 6.36%Mortgage Backed Securities Index 2.20% 9.14% 2.10% 11.14%Multi-Strategy Index 1.36% 4.51% 2.56% 4.54%Technology Index 3.44% 4.55% -3.88% -0.01%U.S. Equity Index 4.07% 2.40% 4.57% 5.18%

Absolute Return Composite Index 2.50% 5.27% 3.44% 6.14%

ABSOLUTE RETURN INDICES (EST)

%S&P 500MSCI WorldAbsolute Return Composite IndexAbsolute Return Global EquityAbsolute Return U.S. Equity-50050100150200250300

S e p - 1 0 S e p - 0 9 S e p - 0 8 S e p - 0 7 S e p - 0 6 S e p - 0 5 S e p - 0 4 S e p - 0 3 S e p - 0 2 S e p - 0 1 S e p - 0 0 S e p - 9 9 S e p - 9 8

MARKET EVENTS

•

Bank of Canada raises interest rates for third time this year

•

Unemployment rate remains at 9.6%

•

Government passes Obama’s Small-Business Bill

•

Dollar falls as Fed admits possibility of further quantitative easing

•

Senate delays vote on extending Bush tax cuts until after mid-terms

Global