| Hedge fund observer: positive results amidst confusion caused by Refco |
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| 23/10/2005 | |
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Hedge funds continued to post strong results amidst some confusion about the impact of the bankruptcy ofRefco, whose filing lists 11 alternative managers among its largest creditors. Yet, the overall picture remains rather positive. Data coming out of the S&P Hedge Fund Index shows that for the fifth consecutive month, hedge fund returns have gained ground. Hedge funds added 0.97% in September, putting them at 2.42% for the year. The most successful strategies were arbitrage, direction / tactical, and event-driven. The Hennessee Hedge Fund (HFI) Index showed even stronger growth at 6.22% YTD. The HFI posted a 1.70% return in September, while the S&P 500 increased 0.81% (+2.76% YTD), the Dow Jones Industrial Average rose 0.83% (-2.00% YTD), and the NASDAQ Composite Index was flat at -0.02% (-1.09% YTD). According to IXIS CIB's analysts, the market environment has been favourable to hedge funds thanks to strong performances on risky markets. High yield and emerging spreads have been under strong pressure, even reaching a historical low for the latter. On the downside, volatility has remained low on equity markets - not a good trend for hedge funds blossoming on shaky ground. Changes in the economic and financial environments could also lead to new winning strategies, according to Charles Gradante, managing principal of Hennessee Group. "Merger arbitrage managers may be the next hot strategy as Europe is setting the stage for a continuation of deals going forward. Seven of the ten largest deals done globally in the third quarter, including the three largest deals overall, were in Europe, no the US", he said. |
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