Hedge funds began the fourth quarter with an average 1.38% return for October and double-digit gains for the year to date, but most strategies still lag the major stock indices' rally.

According to the Credit Suisse First Boston/Tremont Hedge Fund Index, which charts the performances of 448 funds in 10 broad categories, emerging markets funds and traditional long-short equity funds were October's best-performing strategies, up 2.25% and 2.36%, respectively.

The average fund in the index is up 12.02% for the year to date, significantly behind the

S&P 500

Index, which gained 5.66% in October and is up 21.21% for the year to date.

Short-bias funds took a pounding, with average returns a negative 7.56% for the month and negative 28.45% for the year to date.

Stephen Jupp, vice president and director of quantitative research at Tremont Capital Management, which keeps a database on the performance of more than 3,000 funds, said that while hedge funds seek returns that are not correlated to broader markets, some strategies are affected by market trends.

"When you go into more bullish markets, there'll be a more directional flavor in some of the equity-based returns," he said.