Investing July 10, 2003

Hennessee: Hedge Funds Inch 1.51% Higher In June

July 10, 2003 (PLANSPONSOR.com) - The Hennessee Hedge Fund Index produced a 1.50% return in June.
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June’s top performance was turned in by the Hennessee Pacific Rim Index with a return of 3.42%, as the equity markets inKorea, China, and Taiwan bounced back from the SARS effects, in a “relief rally”. China was the main contributor as its currency, effectively pegged to the US dollar, made Chinese products more competitive abroad.   Year-to-date the Pacific Rim index is up 5.28% and the overall Hennessee Index has returned 8.98%, according to the Hennessee Hedge Fund Group.

The second best performer for the month was the Distressed Index, with a return of 2.79%. The rising equity market and strong indications of an economic recovery bolstered the asset class as a whole, with the average high yield bond now trading at $0.99 on the dollar.  Further, June’s return helped to pad its 13.41% performance in 2003. 

Covering the show bets was the International Index, posting a return of 2.73% for June boosted by positive news coming out of Germany and Argentina for the first time in months. Year-to-date, the index is up 9.91%.

Other gains for June were noted in:

  • Health care and Biotech Index – up 2.54% in June; 16.80% YTD
  • Emerging Markets Index – up 2.52% in June; 10.82% YTD
  • Event Driven Index – up 2.17% in June; 10.84% YTD
  • Telecom and Media Index – up 1.99% in June; 17.03% YTD

The Other Side

For the third consecutive month, (See  Hedge Funds 4.03% Higher in May ), the Short Biased Index was the worst performer, posting a negative 5.03% return in June. Short biased hedge fund managers were experiencing difficulty making money on their shorts as the market rallied across the board and high betas ruled over presumably weak balance sheets.  For the year, the index is down 14.20%.

Turning in its first down month of 2003 was the Hennessee Convertible Arbitrage Index, with a loss of 0.53%.   The decline was attributed to two factors:   the fall of implied volatility to near all-time lows placing a premium contraction across the board and issuance through June exceeding issuance for the all of 2002, most at “rich premiums” that created supply and demand imbalances.   However, with five months of positive returns under its belt, the Index was still able to post a positive 7.01% return year-to-date.

The only other index to experience June gloom was the Market Neutral Index, down 0.20%.   For the year, the Index has managed to remain in the plus column, up 0.20%.

Otherwise, the index’s numbers kept pace with the broader market indices: the S&P 500 Index was up 1.28%, the Dow Jones Industrial Average 1.53% higher and the NASDAQ Index up 1.68% in June.

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