New York (HedgeCo.net) – While the hedge fund industry has been lagging the overall market during the last few years as the S&P 500 moved sharply higher in 2013 and 2014, this year’s volatility has helped one hedge fund strategy outperform the overall market and that strategy is the equity long/short strategy.

According to the Credit Suisse Long/Short Equity Index, equity long/short strategies as a whole have trailed the overall market in each of the last six years and as of the end of October they are on pace to beat the S&P 500 in 2015. After yesterday’s big loss, the S&P moved in to negative territory for the year. As of the end of October, long/short strategies were up 3.7 percent on the year.

A recent article from Bloomberg showed that the Credit Suisse index has remained in positive territory throughout the year while the S&P has waffled back and forth from gains to losses throughout the year.
Because the strategy places both bullish and bearish bets, the dispersion in the performance of the various sectors has undoubtedly helped long/short funds in 2015. Of the ten main sectors, four were in positive territory and six were in negative territory as of yesterday’s close.

Many long/short funds use momentum indicators to place bullish trades on stocks and sectors with upward momentum and bearish bets on stocks and sectors with downward momentum. The discrepancy between the top performing sector (Consumer Discretionary +11.58%) and the worst performing sector (Energy -16.03%) has undoubtedly helped such funds.

Rick Pendergraft
Research Analyst
HedgeCoVest