The still-unresolved issues surrounding the European debt crisis have led to a decline in worldwide hedge fund values in November -- the fifth drop over the last seven months, latest figures from Hedge Fund Research shows.

For November 2011, the HFRI Fund Weighted Composite Index fell by -0.92 per cent on continued investor caution and risk aversion across equity and credit-sensitive strategies. 

The HFRI Relative Value Index dropped -0.15 per cent in the same month due to weakness in convertible arbitrage and yield alternatives, although this was partially offset by positive contributions from fixed income asset backed and volatility strategies. Convertible arbitrage was down -1.31 per cent and yield alternatives dropped -0.58 per cent. On the other hand, the asset backed index gained +1.5 per cent and volatilty funds went up +2.5 per cent. 

The HFRI Equity Hedge Index also fell by -1.60 per cent, against an almost 5 per cent gain recorded in October. The Macro Index was down -0.35 per cent, while the Event Driven Index declined by -0.65 per cent. 

The index reflects a collective worldwide decline, although the Asian hedge fund environment may pose more positive opportunities for fans of this asset class. In a related survey conducted by UK-based accountancy firm Ernst & Young, Asia-Pacific hedge funds were predicted to experience significant growth over the next 12 months, particularly in "matured" markets as Hong Kong and Singapore. Looser regulatory environments in Korea and Taiwan are also opening doors for hedge fund investors and managers who now only need at least $440,000 to invest.

"Hedge funds posted declines and mixed strategy performance in November, with most of the month dominated by uncertainty on a resolution of the European sovereign debt crisis raising questions about possible adjustments to the Euro currency," said Kenneth Heinz, president of HFR.

"In the current environment, funds are maintaining flexible, hedged and opportunistic positions across asset classes, balancing their core micro portfolio holdings with informed macro themes, while continuing to expect and anticipate directional volatility," he added.