After the index declined by 0.47% in October in what was a miserable month for many hedge funds, Charles Davidson, Senior Hedge Fund Specialist at S&P noted that hedge funds were able to bounce back as markets recouped their losses during November.

"As corporate earnings continued to be strong and positive economic data continued to emerge, the risk tolerance of investors returned - and with that the performance of hedge funds," stated Mr Davidson.

Equity Long/Short managers were among the main beneficiaries of the market reversal in November, as the S&P Equity Long/Short Index gained 2.48% for the month.

The S&P Managed Futures Index was one of the strongest performers last month, returning a robust 4.19% during November as gains were made from the rising value of the US Dollar against European and Asian currencies. Funds which bought metals contracts also benefited from a rally in the price of copper and gold.

The S&P Event-Driven Index gained 0.45% during November, with continued high levels of activity in mergers & acquisitions, buyouts and restructurings continuing to provide attractive opportunities. According to S&P, many managers took gains in November as spreads began to tighten over news that an agreement had been reached between Guidant and Johnson & Johnson with respect to a deal repricing.

"Managers now feel comfortable that there is sufficient liquidity in the marketplace to improve financing risk despite the increasing size and number of deals being completed," observed Mr Davidson.

However, the S&P Arbitrage Index declined 1.26% during November, led lower by the underperformance of convertible and fixed income strategies and putting to an end a short rally which had been witnessed over the last few months.

Year-to-date, the S&P HFI has returned 2.01% through the end of November.