search   Knowledge Bank printable version
 News
 Knowledge Bank
 Deal Information
 International
 Software
 Publications
 Industry Events
 Advocacy Forums
 Links
 Site Utilities
 Contributors
 Free Offers
 Home

Click here to
Update Registration
Information

Please be advised that the use of Securitization.net ®
is subject to the
Terms & Conditions

of use and the
Privacy Policy

Download

Best viewed in

Knowledge Bank > Hedge Funds
Select an area


Free Subscription for site members.

Hedge Funds Profit from Equity Market Driven by Fundamentals
RiskCenter.com (June 9, 2005)

Location: New York
Author: RiskCenter Staff
Date: Thursday, June 9, 2005
--------------------------------------------------------------------------------

Hennessee Group LLC, an adviser to hedge fund investors, yesterday announced that strong equity markets contributed to positive performance of hedge funds in May, as the Hennessee Hedge Fund Index climbed +1.30% (-0.27% YTD).

The broad market indices were also positive for the month as the S&P 500 increased +3.18% (-0.96% YTD), the Dow Jones Industrial Average rose +2.70% (-2.93% YTD), and the NASDAQ Composite Index improved +7.63% (-4.93% YTD).

"The flat yield curve, low volatility (VIX), and tight equity trading range throughout 2005 continues to hurt hedge fund performance," said Charles Gradante, managing principal of Hennessee Group LLC. "Many managers believe the equity markets are in the process of breaking out, but manager concerns about systemic risk in the credit markets continue to overshadow the positive views developing in the equity market."

The Hennessee Long/Short Equity Index increased +2.04% (-1.00% YTD) in May. Managers were able to take advantage of the broad market rally, while limiting their losses on the short side. The main catalyst sparking hedge fund returns was the lower than expected inflation number. Furthermore, managers believe the Federal Reserve's comments indicating a possible end to interest rate tightening will help stocks to rally further and, as a result, hedge funds have increased their net market exposure.

"Equity managers had their best month for the year as stocks moved on fundamentals rather than technicals and indications of an economic 'soft landing'," stated Mr. Gradante.

The Hennessee Arbitrage/Event Driven Index was down in May, returning -0.03% (-0.99% YTD), as positive returns in merger arbitrage and credit related strategies were offset by losses in convertible arbitrage. Distressed managers were aided by a firming of the credit market and narrowing credit spreads after a sharp sell off in March and April. However, the convertible arbitrage market was hampered by the continued selling of convertible bonds, further compounding illiquidity, and the decline in volatility. Managers continue to search for the bottom.

"Convertible arbitrage managers are having their worst year since 1994. The decline in convertible bond prices continues due to forced sellers and credit risk fears," commented Mr. Gradante. "Many managers reported that buying opportunities are developing and expect a turnaround in the second half."

The Hennessee Global/Macro Index rallied +1.21% (+2.26% YTD) in May. Investors increased their risk appetite in May as the belief that the global marketplace would rally if indications of the cessation of interest rate tightening proved to be true. Net long equity exposure offset losses due to the flattening of the yield curve, the rally in the dollar, and the sell-off in gold. Finally, international equities rallied with the U.S. markets.

--------------------------------------------------------------------------------
Article Printed From RiskCenter.com

 

 

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

Legal Notices | Attorney Advertising | Site Index | Contact Webmaster

*The site links listed on this web site are for reference use only.
The firm does not necessarily sponsor, endorse or verify the accuracy of the content contained in any of these sites.