Early word from The Hennessee Group is that hedge funds tracked by the firm’s index earned 1.9% in October. If that number holds up, it would follow a stellar September performance of 3.5% and put the Hennessee Hedge Fund Index up 6.6% for the year.

In a news release announcing the return data, Hennessee Group co-founder Charles Gradante said arbitrage, event-driven and credit strategies were the biggest drivers of performance last month. Those three strategies have outperformed long/short equity strategies all year, including in October, he said.

Still, hedge funds’ positive performance still appears to be tied closely to the performance of the broader markets. In other words, it looks beta-driven, and beta isn’t what investors pay 2 and 20 for.

The Standard & Poor’s 500 stock index earned 3.7% in October and is up 6.7% year-to-date, according to Hennessee. The Dow Jones Industrial Average was up 3.1% last month, putting it up 6.6% year-to-date. The Nasdaq Composite Index earned 5.9% in October and is up 10.5% year-to-date. Even the Barclays Aggregate Bond Index has been in on the act this year. Although it earned only 0.4% last month, it’s still up 8.3% year-to-date.

“The financial markets continued to rally as the companies reported solid earnings and the Fed announced an additional round of quantitative easing,” Mr. Gradante said. “Hedge funds posted strong positive performance, but lagged traditional benchmarks due to conservative exposure levels and losses from hedges.”

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