New York (HedgeCo.net) – The third quarter came to a close and most investors are probably happy to see it go as it was the worst quarter for the overall market since the third quarter of 2011. The final tally for September was a loss of 2.64% for the S&P 500 and for the quarter the loss was 6.94%.

What will be interesting to see is how hedge funds fared in September. All of the major hedge fund indices showed the industry as a whole did much better than the overall market in August when the S&P fell over 6%. Most of those same hedge fund indices had the industry lagging the overall market ever so slightly in July and now September has shown another loss for the overall market.

In the last 12 months, the overall market has declined in six of the 12. Each time the overall market was down, the hedge fund industry outperformed the overall market and that is based on the results of the Credit Suisse Hedge Fund Index (CSHFI). During these six monthly instances where the overall market fell and the CSHFI was able to beat it, twice the CSHFI was breakeven while the market fell. Twice the CSHFI was higher and the S&P was lower and twice the CSHFI didn’t fall as much as the S&P.

With the drop in the overall market in each of the last two months and given the history of the hedge fund industry outperforming when the market is down, probabilities suggest that the industry did better than the overall market in the third quarter.

Rick Pendergraft
Research Analyst
HedgeCoVest