Hedge Funds Bounce Back, But Lag Equity Recovery in November

December 9, 2002 (PLANSPONSOR.com) - Hedge funds generated a 2.55% return in November, but lagged the broader market indices.

According to the The Hennessee Hedge Fund Advisory Group, during November the S&P 500 Index gained   5.85%, the Dow Jones Industrial Average rose 5.94% and the Nasdaq Index saw a 11.21%-hike.

However, hedge funds still take the day measured on a year-to-date basis, according to Hennessee. Hedge funds are down 2.56%, but that is better than the S&P 500, which is down 17.32%, the 11.23% loss registered by the Dow Jones Industrial Average, and the 24.17% loss recorded by the tech-laden Nasdaq.   In addition, Lipper Mutual Funds are down 18.19% year-to-date.

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November’s lower volatility helped the equity markets rally as the VIX index closed below 30 for the first time since June 26, 2002.   High Yield hedge fund managers profited, posting a +7.40% return for the month, as default rates declined and spreads narrowed from 1100 basis points in October to 810 basis points in November, Hennessee said.

Healthcare/Biotech managers followed with a 4.66% return for the month as the sector rallied due to a high beta coefficient for most healthcare/biotech stocks.

The third best performing style for the month was Telecom/Media with a 4.20% return as improving confidence and high beta coefficients in the sector fueled rising stock prices.

Only three strategies were in negative territory for November. though they are still the best performers for the year to date. Short Biased hedge fund managers were caught in a strong market rally and had a negative return of 3.37%.   Market Neutral managers posted a decline of 1.63%.

Europe, the third worst performing strategy, lost 0.50% in light of a weak economic picture in most European countries, most notably Germany.

The Hennessee index also lagged the broad markets in October. (See   Broad Market Beats Hedge Fund October Performance ).