Hedge funds posted a broad-based gain in September, with the HFRI Fund Weighted Composite Index rising by three per cent, according to Hedge Fund Research.

The strong third quarter gain brings the year-to-date performance of the composite to over 17 per cent, following record losses in 2008 of over 19 per cent.

All core strategies posted gains for the month, with the strongest of these from event driven with a gain of over 4.2 per cent.

Funds focusing on distressed, activist, asset backed and convertible strategies all benefited from credit spread tightening and appreciation in RMBS and CMBS securities, this ahead of the US government funded PPIP.

The single sub-strategy which declined in September was short bias, which lost 4.9 per cent bringing YTD losses to over 19 per cent. This contrasts with a gain of 28.4 per cent in 2008.

After a modest gain in August, emerging markets funds were again performance leaders, with the HFRI Emerging Markets (Total) Index rising by 6.2 per cent.