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Key takeaways for the month of October 2013:

• Hedge funds raised US$100 billion through asset flows in 2013 as at end-October
• Total assets in the hedge fund industry stand at US$1.91 trillion, set to cross the highest level on record by end-2013
• Assets in Greater China focused funds reached US$12.9 billion, the highest level on record
• Asia ex-Japan hedge funds have outperformed the underlying markets by more than 5% October year-to-date
• Japanese hedge funds remained ahead of other regions, up 22.68% as at end-October

Regional Indices

US related news dominated global markets for most of the month starting with the 16 day partial shutdown of the government. Political wrangling in the US Congress over the debt limit added risk to the markets, with equities declining at the start of the month. The shutdown was ended mid-month, which saw equities gain traction. Positive macroeconomic data throughout the month as well as the expectation that the US Federal Reserve will postpone tapering, added further impetus to global markets.

All regions posted positive returns for the month with Asia ex-Japan focused funds delivering the strongest gains for a second consecutive month. The Eurekahedge Asia ex-Japan Hedge Fund Index was up 2.03% in October. Hedge funds focused on India and Australia/New Zealand delivered the strongest gains amid strongly rallying markets - the BSE Sensex was up 9.21% while the ASX All Ordinaries Index gained 3.88%. Greater China focused funds outperformed during the month with gains of 1.67% while the Hang Seng was up 1.52% and the Shanghai Composite declined 1.52%. Asia ex-Japan hedge funds remained ahead of the underlying markets October year-to-date with gains of 8.65%, in comparison the MSCI Asia Pacific ex-Japan Index which is up 3.18%.

European hedge funds were up 1.67% during the month, the underlying markets were supported by positive macroeconomic data, industrial production strengthened and economic confidence indices rose to multi-year highs. Japanese hedge funds also posted healthy returns in October gaining 0.85% and outperforming the the Nikkei 225 which was down 0.88% during the month. Japanese hedge funds remained ahead of their counterparts in the year-to-date returns measure with gains of 22.68% through October 2013. North American hedge funds were up 1.36% in October as most managers traded with confidence throughout the month, despite the headline risk emanating from a political deadlock in the US Congress.

Strategy Indices

Multi-strategy and long/short equity managers led the tables by posting gains of 1.82% and 1.77% respectively as underlying equity markets rebounded following a resolution of the US fiscal impasse. Fixed income managers realised gains of 1.32% as credit markets rebounded following the Fed's postponement of its QE tapering plans. The highlight of this month was the positive performance posted by CTA/managed futures funds which were up 1.06% in October following five consecutive months of losses. Managers utilising systematic strategies realised gains of 1.62%, while those deploying discretionary strategies were up 1.21%. A number of managers also reported gains from their short positions in the British pound and Canadian dollar which depreciated against the dollar last month. Distressed debt strategies - which are up 12.17% at 2013 year-to-date - lagged behind all other strategies last month with returns of 0.87%, underperforming the Bank of America Merrill Lynch US High Yield Index which was up 2.46% during the month.

Press release

bc