Hedge funds posted the strongest monthly gains so far this year in October, riding on the strong rebound in equities markets.

However, the HFRI Fund Weighted Composite Index's 2.43% gains in October were less than the S&P 500's 10.92% rise and only partially offset losses earlier this year, Chicago-based Hedge Fund Research said on Monday. For the first 10 months, funds recorded an average 3.5% drop in performance, it said.