September Best Month for Hedge Funds in Years

Hedge Funds Return +3.27% in September 2007 and +9.40% Year-to-Date

Early estimates show the HFN Hedge Fund Aggregate Average, an equal weighted average of all single manager hedge funds and CTA/managed futures products in the database, was +3.27% in September 2007. The increase was the largest in over four years, and the second largest month for hedge funds in eight years. The database consists of over 7,700 current hedge fund, fund of
funds, and CTA products.

Hedge funds across most strategies benefited from the U.S. Federal
Reserve's attempt to ease extremely tight credit markets. Strategies which
fared worst in August came back strong to erase previous month's losses.
Commodity related funds performed extremely well as the Fed rate cut
spurred inflationary concerns. The HFN CTA/Managed Futures Average, with
234 products reporting September performance, was +6.15% and is +7.11% YTD.
Energy sector funds also took advantage of oil rising above $80/barrel and
the HFN Energy Sector Average finished September +4.99% and is +13.95% YTD.
Emerging market funds returned an average of +4.60% and the HFN Emerging
Markets Average is +16.79% YTD.

Excellent performance wasn't limited to commodity related strategies.
Equity markets surged after the U.S. Fed rate cut and strategies which
typically maintain long biases were rewarded. Long only funds were +3.15%
in September while long/short equity managers were +2.98% and the HFN Long
Only and Long/Short Equity Averages are +10.55% and +10.66% YTD,
respectively. The fact that long/short equity managers are outperforming
long only funds YTD is likely a testament to maintaining short exposure
during volatile periods. Other equity related strategies which performed
well in September include technology sector funds +8.33%, small/micro cap
funds +4.32%, and healthcare sector funds +3.50%.

Macro funds which often position themselves across multiple asset
classes appear to have taken advantage of the strong moves seen in interest
rate, currency and commodity markets. The average macro fund was +3.93% in
September and the HFN Macro Average is +9.18% YTD. The global macro
strategy was one of a handful of strategies tracked by HFN to outperform
broad equity markets in the third quarter, returning +3.97% during the
difficult three month span.

Distressed managers returned an average of +0.57% in September, ending
a two month streak of negative performance, but were still -2.06% in Q3
2007 and +5.85% YTD, their worst nine month start since 2002. Short bias
funds were the only strategy posting negative returns in September, -2.45%,
and the HFN Short Bias Average fell back to negative territory YTD, -1.43%.

A full report on September performance will be available at
http://www.hedgefund.netlater in the month.

The table below is a summary of September 2007 returns for a selection of
HFN Averages:

September* YTD 2007** Full Year
HFN Aggregate Averages 2006**
HFN Hedge Fund Aggregate Average 3.27 % 9.40 % 11.99 %
HFN Regional Averages***
HFN Asia Average 4.33 % 14.84 % 8.22 %
HFN Europe Average 1.00 % 6.37 % 15.37 %
HFN US Average 3.17 % 8.47 % 11.04 %
HFN Latin America Average 3.83 % 20.81 % 29.86 %
HFN Single Strategy Averages
HFN Convertible Arbitrage Average 1.68 % 4.73 % 12.84 %
HFN CTA/Managed Futures Average 6.15 % 7.11 % 6.89 %
HFN Distressed Average 0.57 % 5.85 % 14.90 %
HFN Emerging Markets Average 4.60 % 16.79 % 22.46 %
HFN Energy Sector Average 4.99 % 13.95 % 13.32 %
HFN Event Driven Average 1.01 % 7.13 % 13.76 %
HFN Long/Short Equity Average 2.98 % 10.66 % 12.10 %
HFN Macro Average 3.93 % 9.18 % 10.46 %
HFN Market Neutral Equity Average 1.46 % 5.32 % 6.58 %

*Estimated results of funds reporting September 2007 performance as of
October 9, 2007
**Estimated results for all funds having reported performance as of
October 9, 2007
***Regional averages derive performance from returns of funds investing
primarily in those regions.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS (HFN), a division of Channel Capital Group Inc, is a
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Joel Schwab
Managing Director
Channel Capital Group Inc.
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