Hedge funds globally consolidated their upward trend in September, with all hedge fund strategies except dedicated short-bias (down 1.22%) ending the month in positive territory based on Lipper Global Hedge Classifications as at the end of the month.

A series of positive US macro readings, the International Monetary Fund’s upwardly revised forecast and rising merger and acquisition deals contributed to the stock market rally. Directional managers outperformed relative-value and event-driven strategies at the end of September. Emerging markets (up 1.96% for the month and 18.94% year to date) and long-bias (up 1.92% in September and 20.73% YTD) were the best performing strategies for September.

Convertible arbitrage (up 1.76%), long/short equity (up 1.48%) and global macro (up 1.25%) also had a good month.

Global stock markets have consolidated their gains since mid-March, climbing 4.02% month on month at the end of August, according to the MSCI World TR Index. The US equity market surged 3.73% as reflected in the S&P 500 TR Index. Benefiting from a weak US dollar, rising commodity prices and steady capital inflows, emerging markets, especially Brazil, Russia, India and China — performed significantly better than developed markets. Latin America (up 10.86%) outperforming all emerging regions.

Funds over weighted in Brazil equities gained significantly as Brazil's Bovespa ended the month up 8.90% following a decision by Moody's Investors Service to raise Brazil's sovereign credit rating to Baa3, an investment-grade rating.

Yield-stripped spreads between Brazilian sovereign bonds and US Treasuries, a key indicator of investor aversion to risk, tightened 37 basis points in September to 234bp.

The S&P Global BMI Emerging Markets Index rose 8.55% month on month, led by Russia (+17.30%) and Brazil (+14.50%).

Developed markets ended up 4.21% at the end of September with Korea (up 11.65%), Australia (up 11.12%) and Norway (up 10.62%) posting impressive double-digit returns.