The HFRI Fund Weighted Composite Index, a broad measure of returns, fell an estimated 1.4 per cent in October, according to Hedge Fund Research. About 60 per cent of hedge funds lost money during the month. From the start of January, however, the index has been up 5.42 per cent.

Equity strategies did the most damage to the overall result. The HFRI Equity Hedge (Total) Index fell 2.4 per cent, led by the HFRI EH: Fundamental Growth Index and the HFRI EH: Technology Index, which lost 5.6 per cent and 4.8 per cent respectively.

The losses tracked a sharp selloff in US technology stocks. The Nasdaq Composite fell 5.3 per cent over the month, its worst monthly performance since March 2025, while the Dow and the Russell 2000 finished in positive territory. Intel, Alphabet, Meta Platforms and Nvidia were among those firms that experienced the heaviest falls, Chicago-headquartered HFR said in a statement late last week. 

The HFRI Event-Driven (Total) Index slipped 0.2 per cent as managers positioned for more IPO activity in November. The HFRI ED: Activist Index gained 3.6 per cent and merger arbitrage added 0.1 per cent, but credit arbitrage lost 2.7 per cent and distressed/restructuring fell 1.8 per cent.

The HFRI Macro (Total) Index fell 1 per cent. Discretionary thematic strategies lost 3.2 per cent and commodity funds fell 1.9 per cent, while systematic trend-followers were broadly flat, down 0.1 per cent.

Fixed income provided some offset. The HFRI Relative Value (Total) Index gained 0.2 per cent, led by the HFRI RV: FI-Sovereign Index, up 5.3 per cent, yield alternatives, up 4.6 per cent, and asset-backed strategies, up 2.1 per cent.

HFR’s HFRX indices, which track liquid alternative strategies, also declined. The HFRX Global Hedge Fund Index lost 1.2 per cent and the HFRX Absolute Return Index fell 0.4 per cent.

Dispersion widened. The top decile of the composite’s constituents gained an average of 7.7 per cent, while the bottom decile lost 13.2 per cent, a spread of 20.9 per cent against 14.6 per cent in September. Over the 12 months to October, the gap between the top and bottom deciles reached 61.2 per cent.

HFR said managers spent October positioning for US policy changes. It expects these following last Tuesday’s midterm elections, which shifted control of Congress to the Democrats.

“Hedge funds were positioned for rapid policy shifts heading into the midterms, and the result guarantees that volatility will remain elevated over the intermediate term,” Kenneth J Heinz, president of HFR, said. “Factors ranging from AI regulation and data centres to tariffs and taxes, interest rates and the Iran conflict will drive market performance.”

The October loss contrasts with a year earlier, when hedge funds extended their gains.