Hedge fund performance fell during November as many strategies were hit by unfavourable market conditions, caused by the continuing eurozone sovereign debt woes.

Dow Jones/Credit Suisse
The Dow Jones Credit Suisse Hedge Fund Index finished down 0.79% in November. There were outflows of approximately $4 billion. The industry finished the month with overall assets of $1.7 trillion. On a year-to-date basis to the end of November, six out of 10 strategies were in positive territory. Directional strategies experienced intra-month volatility related primarily to macroeconomic factors. The rally in the last week of November benefited broader markets more than many long/short equity funds. Tactical trading managers showed generally flat performance. Global macro posted slightly negative performance while managed futures funds posted slight gains. On the relative value front, managers showed mixed performance in November. Fixed income arbitrage managers posted slight gains while convertible arbitrage and multi-strategy managers experienced overall losses.

Frontier Multi-Asset Platform (MAP) Fund
The Frontier Multi Asset Platform (MAP) Fund was down 2.0% in November. The best-performing asset class was managed futures, up 0.1%. The worst-performing asset classes were emerging equities (down 6.7%) on the month, followed by global real estate (down 4.9%), global equities (down 2.4%), commodities and hedge funds (down 1.0% and 0.8%, respectively), while global bonds and emerging bonds were both down 0.5%. Over the five years to November 2011, the MAP strategy has generated a negative 0.2% annualised return with volatility of 9.8%. The Frontier MAP is an investable fund tracking eight global asset class indexes using an asset allocation inspired by US university endowments such as Harvard and Yale.

HFRX
Investor risk aversion remained high throughout November as risks linked to the European sovereign debt crisis remained pronounced. Borrowing costs continued to rise in the EU. Systematic strategies benefited from exposure to oil while gas and soft commodities detracted from gains. Discretionary currency managers experienced mixed performance as commodity strategies declined. Positive performance from fundamental value strategies was offset by declines in fundamental growth and market neutral positioning. Exposure to China and US large caps contributed to gains while small caps and emerging markets detracted from performance. Market neutral strategies dropped as positive performance from behavioural finance strategies was offset by medium-term trend reversal strategies. The HFRX Event Driven Index posted a decline of 0.96% for the month with negative contributions from most sub-strategies.

Lyxor
The Lyxor Global Hedge Fund index was down 0.44% in November, taking year-to-date performance to a negative 6.26%. Markets were sceptical about eurozone debt solutions during much of November but optimism reigned during the final week of the month. Another theme inhibiting investors was light trading as reduced liquidity plagued markets. US Treasuries and the US dollar gained slightly but many hedge funds posted losses in this difficult environment, although some made attractive gains. CTAs generally posted positive returns in November. Long commodity positions typically worked in their favour as did long US fixed income positions. In the final week of the month, short equity, long commodity and short European fixed income positions all lost money. Credit markets suffered from the same fundamental concerns as equity markets but with less liquidity. Merger arbitrage managers generally posted a positive November. Special situations managers posted losses. The Lyxor Fixed Income Arbitrage Index dropped 0.3%. The Lyxor Global Macro Index declined 1.2% but managers provided substantial variation among themselves. There was dispersion across individual long/short equity managers. Managers with limited net market exposure appeared to add alpha.