| Hedge Fund Observer: down for S&P, up for Hennessee |
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| 22/01/2006 | |
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All hedge fund indices do not tell the same story: for some it's up, while for others, it's not so up. Standard & Poor's Hedge Fund Index is to be found in the second category, with a unimpressive 0.26% return in December, as a widespread reduction in risk appetite drove performance down during the last month of the year. However, it is not only about volatility. According to S&P's senior hedge fund specialist, Justin Dew, hedge fund performance during the month of December was dominated by three main occurrences: a strong equity market rally in many Asian markets (notably Japan), a correlated decline in the U.S. dollar versus the yen, and a temporary inversion of the yield curve. Investors looking back at the 12 months of 2005 will surely find more reasons to rejoice over their investments, with a 2.28% annual return. S&P's best performing sub-index for 2005 was the S&P equity Long/Short Index (S&P ELSI), which gained 9.24% over the year. For even more good reasons to be happy (and reasons to sustain a highly positive view about those expensive products), investors will be even better off looking at the Hennessee Group's index, which brilliantly outperformed its benchmark after failing to do so the previous month. The Hennessee hedge fund Index, rose +1.80% (+8.03% YTD) in December, while all the main broad-based indices were posting blemished results: the S&P 500 was flat at 0.04% (+4.90% YTD), the Dow Jones Industrial slightly down at -0.82% (-0.61% YTD), while the NASDAQ Composite Index lost – 1.23M% (+1.38% YTD). "Hedge funds as an asset class outperformed equity and bond markets for December and the year," highlighted E. Lee Hennessee, managing principal of Hennessee group LLC. "Thus far, the fed has orchestrated the most effective withdrawal of monetary stimulus since the 1980s. Equity hedge funds benefited from this as stock research ruled over liquidity driven equity markets for the first time in several years." Another index, the Edhec hedge fund index returned only 0.59% in December, still much less than its benchmark, the MSCI world, at 2.08%. J.L. |
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