Hedge funds gained 3.63 per cent in September, according to the Barclay Hedge Fund Index compiled by BarclayHedge.

Year-to-date the index is up 5.26 per cent.

“September’s gain puts the index into new high ground,” says Sol Waksman, founder and president of BarclayHedge. “The prior peak was established at the end of October 2007 when the index gained 2.87  per cent. It’s taken three years for hedge funds to recover from the financial meltdown and break their previous high.”

Overall, 17 of Barclay’s 18 hedge fund indices had gains in September.

The Barclay Healthcare and Biotechnology Index jumped 6.35 per cent, equity long bias gained 5.86 per cent, emerging markets was up 4.98 per cent, and global macro rose 3.65 per cent.

“Propelled by a robust rally in global equities, a boom in mergers, and declining credit spreads, 90 percent of the hedge funds that have sent us returns for September have reported a profit,” says Waksman.

The only losing strategy in September was the Equity Short Bias Index, which fell 6.45 per cent.

“Selling the market short has been a difficult strategy in 2010,” says Waksman. “After four winning and four losing months this year, short-sellers are now back in the hole.”

The Barclay Fund of Funds Index gained 2.11 per cent in September and is up 1.25 per cent for the year.