A two-tier hedge fund market is emerging, with a wide discrepancy between the highest and lowest trade prices in the secondary market.

The Hedgebay Global Hedge Fund Secondary Market Index showed the highest trade in October took place at net asset value (NAV) for the second time in three months. The lowest-priced trade was priced at just 40% of NAV.

The average trade price was 86.73% of NAV, a 4.41% increase from September, according to the index. Average prices are now at comparable levels to December 2008, although there is still a long way to go before they reach pre-crisis heights of 97% of NAV and above.

Hedgebay co-founder Elias Tueta said the significant volume of trades at heavily-discounted prices showed "riskier, less liquid assets, notably side-pockets, are increasingly overvalued. Sellers currently still have to offload these kinds of assets at whatever price they can get."

Tueta said once an average price of 95% of NAV was reached, the hedge fund market would have returned to normal.

Credit and relative value strategies were the most-traded on the secondary market in October.

The index, launched in September 2009, provides hedge fund investors with statistics on aspects of the secondary market, including the average discount or premium to NAV of hedge fund shares traded during the month.