* Hedge funds up 2.6 pct in 3rd qtr, up 5.1 pct year to date
* Stock funds best performing strategy in September
* Credit funds best performing strategy for year to date
By Katya Wachtel and Svea Herbst-Bayliss
NEW YORK, Oct 5 Hedge funds climbed 2.6 percent
in the third quarter, buoyed by rallying global stock markets,
and some of the industry's most famous investors saw their
portfolios leap into double-digit return territory.
Hedge funds, on average, gained 0.8 percent in September,
according to fund tracker eVestment|HFN, and the strong quarter
helped year-to-date returns for the industry reach 5.1 percent.
Hedge Fund Research, another company that tracks hedge funds'
returns, said its index gained 1.10 percent in September,
leaving it up 4.65 percent for the year.
But hedge funds' gains still trailed the S&P 500 stock
index, which added 2.25 percent in September and was up 16.43
percent for the year.
"Steps taken in the euro zone to alleviate near-term crisis
concerns, along with the, ultimately realized, expectations for
more quantitative easing from the Federal Reserve," helped boost
hedge fund returns in the quarter, said Peter Laurelli, head of
industry research for eVestment|HFN. "However, it appears these
same factors led macro and managed futures to underperform."
Some of the industry's best known names posted stronger
performance than the average hedge fund in the third quarter.
Daniel Loeb's flagship hedge fund, the $4.7 billion Third
Point Offshore Fund, is up 10.9 percent for the year after
gaining 3.4 percent in September, according to an investor note
reviewed by Reuters.
The $6 billion hedge fund Tiger Global, run by Chase Coleman
and Feroz Dewan, is up 22.4 percent for the year after rising
1.5 percent last month, according to two people familiar with
the fund who were not authorized to speak on its behalf.
Funds like Coleman's that focus on investing in stocks were
the best performing strategy in September, eVestment|HFN data
showed, gaining 1.34 percent, pushing yearly returns to 5.8
percent. Stock-focused funds battled to generate gains in 2011
as whipsawing global markets tripped up investors and sent their
portfolios into a tailspin, losing 6.5 percent on average.
Industry superstar Kenneth Griffin's Citadel Global Equities
fund inched up 0.55 percent in September and was up 12.2 percent
in the first nine months of the year. The $13 billion
Chicago-based Citadel's flagship Kensington and Wellington funds
inched up 0.65 percent last month and were up 14.75 percent for
the year to date, a person familiar with the funds' performance
Credit-focused funds have been 2012's best performing
strategy and continued their dominance in the third quarter,
adding 3.8 percent.
For the year, credit funds are up 8.7 percent, many boosted
by big, successful bets in the mortgage-backed securities and
"junk" bond markets. Some credit managers are moving into more
complex structured trades such as collateralized loan
obligations to help boost returns.
The combination of strong performance with new investor
flows sent total credit fund capital to an all-time high through
August, with almost $758 billion in assets, eVestment|HFN said.
Fixed income/credit funds were the only strategy to take in
new flows in the three months to Aug. 30 and have taken the
lion's share of new capital this year, data showed. Equity,
commodity and multi-asset funds all experienced net withdrawals
in the three months through August.
Jason Mudrick's $292 million Mudrick Capital Management
fund, which concentrates on distressed debt and event-driven
investing, extended its strong returns with a gain of 0.81
percent last month, leaving it up 18 percent for the year, a
person familiar with the returns said.
Managed futures funds put in the worst performance in
September, down 0.5 percent. Both macro and managed futures
funds lagged other strategies for the year to date, up 2.43
percent and 0.97 percent, respectively.
"Though they are a diverse group, it appears the aggregate
exposures are being hurt by the strengthening euro and the
equity market rally of the last two months, indicating the
group, on an aggregate basis, may be positioned defensively,"
Not all macro funds have struggled to punch out double-digit
returns. Fortress Investment Group's flagship macro fund
rose 3.58 percent in September, pushing year-to-date returns to
more than 11 percent, a regulatory filing showed. The asset
manager's Asia Macro Fund is up 10.66 percent for the year.
Also, the flagship fund at Moore Capital Management, run by
founder Louis Bacon, delivered a 2.69 percent gain in September,
leaving it up 5.70 percent for the year, an investor said. In
early August Bacon told investors he was returning some money to
them, saying market conditions made it difficult to manage huge
sums of money.
The biggest hedge funds, which eVestment|HFN categorizes as
firms with more than $1 billion under management, once again
trumped smaller firms during the third quarter.
Och-Ziff Capital Management, which like Fortress is
one of a handful of publicly traded asset managers, said its Och
Ziff Master Fund was up 1.09 pct in September, leaving it up 8.2
percent year to date.
Pershing Square, William Ackman's $10 billon hedge fund,
lost 0.5 percent in September but gained 4 percent over the
third quarter. His fund is up 9 percent year to date, according
to someone with knowledge of the returns.
Marcato Capital Management, a $750 million hedge fund run by
one of Ackman's former partners, Mick McGuire, bucked the trend
of smaller managers lagging the behemoths. That fund rose 2
percent in September and is up 22.4 percent year to date, said a
person familiar with the numbers.
Despite strong returns in emerging market funds, which have
gained 7.8 percent this year through September, investors still
yanked $4.9 billion from the strategy in the first two months of
the quarter, eVestment|HFN said.
Funds that specialize in investing in Brazil have also had a
good run, up 8.63 percent for the year after gaining 4.3 percent
in the third quarter, the data showed.