HedgeCo.net (West Palm Beach) – Hedge fund investor consultant and adviser, Hennessee Group LLC, today announced some highlights from the first half of 2009 and the month of June, excerpts follow:
“Most hedge fund managers are not buying into the ‘Green Shoots’,” commented Charles Gradante, Co-Founder of Hennessee Group. “While markets rallied sharply in April and May, most managers remained conservative. I think we have reached an inflection point as momentum seems to have faded. We should see a return to stock picking based on fundamentals, which are rather negative. In addition, the technicals are also bad, leading us to believe in a summer correction.”
“Hedge funds have outperformed equity benchmarks by a 10% margin in the first half of 2009,” said Lee Hennessee, Managing Principal of Hennessee Group. “The outperformance is largely due to the ability of hedge funds to profit from their short portfolios, as we saw in January and February. While hedge funds are routinely publicized as high risk vehicles, the reality of the situation is that the average hedge fund has demonstrated significantly less volatility than traditional asset classes for the 22 years we have been advising investors.”
Despite a flat June, the second quarter gain was the strongest quarterly gain since 1998. In June, energy and materials sectors declined as worries mounted that the global economy could experience a drawn out recovery after the World Bank cut the global growth forecast.
Managers remain concerned that the recent rally in the financial markets and resurgence in confidence is built on hope supported by government stimulus rather than a real improvement in fundamentals (i.e., employment and housing).
Long/short equity funds will continue to rely on individual security selection while maintaining low levels of directional exposure as the official second quarter earnings season gets under way with the Alcoa earnings announcement on July 8th. Many managers are overweight technology in long portfolios, the top performing sector for the month and the year, while maintaining short positions in consumer and financial sectors.
Managers have found opportunities in strategic acquisition activity as well as distressed merger and acquisition activity.
After three months of strong gains, emerging markets cooled, declining slightly in June, but are substantially positive year to date. China was one of the few bright spots in June as the equity markets continued to advance. The Hennessee Macro Index declined -1.08% in June (+7.10% YTD).
While May was a record breaking month for commodities, June brought a sharp pull back. Positions in gold, silver, and agricultural commodities all detracted from performance as prices fell. Managers also suffered losses as the U.S. dollar rallied versus most currencies on speculation that the current market rally has ended and reports that the Fed will not expand its purchases of Treasuries. Oil was a positive, up +5.4% in June; although, many believe that prices are being driven by speculation and expect profit taking as oil is up +56.4% thus far this year.
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