Hedge funds posted mixed declines in October, with sharp drops in Technology and AI-related equities driving weakness across Equity Hedge and Growth exposures, which was only partially offset by strength in Activist and fixed income strategies.
Throughout the month of October in anticipation of the US midterm election results, managers positioned for significant US government policy adjustments which are expected to occur with the change in control of the US Congress shifting to the Democrats after Tuesday’s “blue wave”.
The HFRI Fund Weighted Composite Index (FWC) declined an estimated -1.4 per cent in October, as reported by HFR.
“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. Factors ranging from AI regulation and data centres to tariffs and taxes, interest rates and the Iran conflict will drive market performance, with an increased possibility for disruptions and dislocations in the coming quarters,” says Kenneth J. Heinz, President of HFR.
“Hedge funds are now navigating a highly uncertain environment with regard to what the policy and oversight changes will look like over the next two years, ensuring more market instability which in turn should provide significant opportunities for active management.”
Driven by sharp declines in Growth and Technology exposures, the HFRI Equity Hedge (Total) Index fell -2.4 per cent in October, with declines led by the HFRI EH: Fundamental Growth Index and HFRI EH: Technology Index, which fell -5.6 and -4.8 per cent, respectively, for the month.
The HFRI Event-Driven (Total) Index posted a narrow decline of -0.2 per cent in October, as managers positioned for additional IPO activity in November. ED sub-strategy performance was led by the HFRI ED: Activist Index, which jumped +3.6 per cent, while the HFRI ED: Merger Arbitrage Index added +0.1 per cent. Offsetting these gains, the HFRI ED: Credit Arbitrage Index fell -2.7 per cent, and the HFRI ED: Distressed/Restructuring Index lost -1.8 per cent.
Navigating the mix of technology equity volatility and geopolitical uncertainty, the HFRI Macro (Total) Index fell -1.0 per cent in October. Macro sub-strategy declines were led by the HFRI Macro: Discretionary Thematic Index and HFRI Macro: Commodity Index, which suffered losses of -3.2 and -1.9 per cent, respectively. The quantitative, trend-following HFRI Macro: Systematic Diversified/CTA Index posted a narrow decline of -0.1 per cent for the month.
Partially offsetting these strategy declines, the fixed income-based, interest rate-sensitive HFRI Relative Value (Total) Index posted a minimal gain of +0.2 per cent in October. RVA sub-strategy performance was led the HFRI RV: FI-Sovereign Index (+5.3 per cent), the HFRI RV: Yield Alternatives Index (+4.6 per cent), and the HFRI RV: FI-Asset Backed Index (+2.1 per cent).
Liquid Alternative UCITS strategies also fell in October, with the HFRX Absolute Return Index declining -0.4 per cent, while the HFRX Global Hedge Fund Index lost -1.2 per cent. Strategy declines were led by the HFRX Equity Hedge Index, which declined -2.5 per cent, while the interest rate sensitive HFRX Relative Value Arbitrage Index fell only -0.2 per cent for the month.
Hedge fund performance dispersion expanded in October, as the top decile of the HFRI FWC constituents advanced by an average of +7.7 per cent, while the bottom decile of constituents fell by an average of -13.2 per cent, representing a top/bottom dispersion of 20.9 per cent for the month. By comparison, the top/bottom performance dispersion in September was 14.6 per cent. For the trailing 12 months ending October 2026, the top decile of FWC constituents gained +43.8 per cent, while the bottom decile fell -17.4 per cent, representing a top/bottom dispersion of 61.2 per cent. Approximately 60 per cent of hedge funds posted performance declines in October.
NOTE: October 2026 index performance figures are estimated as of November 6, 2026
