However, due to the miserable year for hedge funds so far, the index is still down 3.44 per cent for 2011, after “five long consecutive losing months,” says, BarclayHedge.

Over that five-month period of losses, the S&P 500 declined 16.2 per cent, only to go on and soar by 10.93 per cent in October. In fact, last month was the first double-digit positive month since December 1991, and the best October performance since 1974, according to the S&P Market Attributes report.

Robust corporate profits helped boost equity markets, with more than 74 per cent of earnings reported and 67 per cent of the reporting companies beating their estimates.

In this environment, all but one of the 18 hedge fund indices tracked by BarclayHedge made gains. The Equity Long Bias Index jumped 6.64 per cent, in its largest one-month gain since May 2009. Unsurprisingly, the Equity Short Bias Index plunged 8.77 per cent, but remains up 4.53 per cent for the year.

Other gainers included indices tracking emerging markets, healthcare and biotech, and event driven funds. However, as hedge funds collectively underperformed equities over the month, as measured by the index.

“Our late September monthly survey of fund managers found that bearish sentiment rose to 57 per cent, its highest level for the year. Under the circumstances, managers may have been slow to remove some of their hedges,” said Sol Waksman, founder and president of BarclayHedge.

The Barclay Fund of Funds Index gained 1.37 per cent in October, and is down 4.47 per cent year-to-date.