The Bank of America/Merrill Lynch Hedge Fund Generals index up 60% year-to-date (as of mid-November), outperforming the S&P 500 by approximately 40%. Meanwhile, the average global hedge fund index is up 15.03% for the year.
Hedge funds have bounced back this from slight losses in October, with the BofA/ML’s Diversified Hedge Fund Composite up 1.05% MTD. But despite the good news, most hedge fund managers are still substantially below their high water marks, according to analysts at BofA/Merrill Lynch.
“Based on a very optimistic scenario (greater of the rate at the 90th percentile of monthly historical returns or their 2Q09-3Q09 monthly pace) we estimate most strategies will take 4-8 months to get back to their high water marks,” wrote Mary Ann Bartels and Shan Hasnat in the latest Bank of America/Merrill Lynch Hedge Fund Monitor.
“At a slower pace (lower of returns at the 75th percentile and the 2Q09-3Q09 monthly pace - a realistic rate given the favorable interest rate environment and reduced competition), most strategies will take 8-12 months to climb back to their high water marks.”
However, according to the analysts, “merger arbitrage reached that milestone in October. And the average macro fund (but not CTA which has struggled recently) is expected to get back to its high water mark this year under both scenarios.”