Hedge funds rose 3.2% in September, slightly behind the S&P 500’s 3.6% gain but beating the Dow Jones Industrial Average’s 2.3% gain, Hennessee Group said. Meanwhile, the Nasdaq advanced 5.6%.

Year-to-date, hedge funds are up 21%.

Hennessee co-founder Charles Gradante told Dow Jones that what’s been driving higher stock prices is money on the sidelines re-entering the market and that he is worried what will happen once that $3 trillion in liquidity dries up.

The best-performing hedge fund sector in September was emerging markets, up 5%.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.