S&P Hedge Fund Index up 1.23% in December

January 6, 2005 (PLANSPONSOR.com) - Directional and event-driven managers again led the way in December as the S&P Hedge Fund Index rose 1.23% on the month.

The S&P Directional/Tactical Index rose 1.45% in December, with the equity long/short strategy leading the way, according to a press release from the company.
“After underperforming much of the year, a strong fourth quarter rally in US markets has salvaged what appeared to be a weak year for equities,” said Charles Davidson, Senior Hedge Fund Specialist at Standard & Poor’s, in the release. “Through strong stock selection and increased market exposure, hedge fund managers were able to capture much of the positive revaluations in companies.”
Managed futures did not do so well in December, with the European up but earnings mitigated by losses in the precious metals and energy sectors.

The S&P Arbitrage Index ended the month up 0.91%, with relatively strong gains in fixed income arbitrage – particularly mortgage traders – were partially offset by   underperformance in both equity market neutral and convertible arbitrage. S&P attributed the latter two’s mediocre returns to low equity volatility on the month.
The S&P Event-Driven Index returned 1.33% for the month as all three of the supporting sectors landed in positive territory, according to the news release. Distressed and special situations both saw gains after there was a positive reevaluation of a number of companies in the energy and technology sectors. Improving balance sheets caused upward earnings revisions also contributed to the gains seen in this area.

Merger arbitrage profits, despite the announcement of a number of large transactions on the month, remained stagnant.

Year-to-date, the S&P Hedge Fund Index was up 3.88%, with 3.43% of that coming in the last quarter.