Hennessee Group on How Hedge Funds Are Handling This Market ~ market folly

Tuesday, October 9, 2012

Hennessee Group on How Hedge Funds Are Handling This Market

Hennessee Group LLC has released September performance data for its Hedge Fund Index as it was up 1.26% in September (up 5.03% year to date).  Below is some select commentary of what they're seeing from various hedge funds:

Charles Gradante, Managing Principal of Hennessee notes that,

"Despite generally disappointing economic data in the US, the Fed's announcement of additional monetary stimulus encouraged investors to increase risk tolerance and led to a market rally.  Over the long term, managers are concerned that the global economy seems incapable of growing without constant liquidity from central banks.  Current monetary policy is extreme and untested, and it is likely to have negative long-term ramifications.  However, until then, 'don't fight the Fed' is still the rule."

Other Hedge Fund Index Performance Numbers

Global/Macro Index up 1.10% in September (up 3.32% year to date)

Arbitrage/Event Drive Index up 0.80% in September (up 6.06% year to date)

Long/Short Equity Index up 1.51% in September (up 5.13% year to date)

L/S Managers Pressured on Short Side of Portfolio

And given the focus on L/S managers on this site, we found this excerpt from Hennessee's release intriguing:

"While managers have generated significant gains on the long side of the portfolio, they continue to have difficulty shorting.  Managers report that 'the tide has been raising all ships in this low volume, climb-the-wall-of-worry rally, despite the deepening uncertainty of the global economy and the slowing pace of earnings growth.'  Managers report that many companies with deteriorating fundamentals have rallied more than the market over the past several quarters, resulting in short squeezes.  Most managers feel that the markets will continue to rally due to stimulus, but are concerned that fundamentals are not improving."

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