Hennessee Group LLC, an adviser to hedge fund investors, today announced that the Hennessee Hedge Fund Index advanced +2.00% in April (-1.95% YTD) while the S&P 500 advanced +4.75% (-5.65% YTD), the Dow Jones Industrial Average rose +4.54% (-3.36% YTD), and the NASDAQ Composite Index advanced +5.87% (-9.02% YTD). Bonds fell slightly, as the Lehman Aggregate Bond Index declined -0.21% (+1.95%).
The Hennessee Long/Short Equity Index advanced +2.02% in April (-2.92% YTD), as equities continued to advance following a sharp rally subsequent to the buyout of Bear Stearns in March. Still, most long/short equity funds remain conservatively positioned, believing that the financial and housing crisis of the past nine months will likely translate into substantially slower economic growth going forward. Furthermore, most believe that sell-side earnings estimates are generally high for the remainder of 2008.
The Hennessee Arbitrage/Event Driven Index advanced +1.42% in April (-1.39% YTD). The Hennessee Distressed Index rose +1.28% in April (-1.55% YTD). Despite the bankruptcy filings of several airlines and retailers, high yield credit spreads tightened substantially from 8.2% to 6.9% over Treasuries. Most credit managers believe that defaults will continue to increase, high yield debt will likely continue to sell off and, as such, are holding high levels of cash. The Hennessee Merger Arbitrage Index advanced +1.87% in April (-0.21% YTD). Merger spreads tightened as a result of reduced volatility in the equity markets and the more accommodating credit markets provided better financing options for LBOs and cash takeovers. The Hennessee Convertible Arbitrage Index advanced +0.60% in April (-1.55% YTD). Credit related gains were offset by volatility related losses, as the VIX declined from 25.6 to 20.8.
The Hennessee Global/Macro Index advanced +2.23% in April (-1.52% YTD). International equities rose along with those in the US, as the MSCI EAFE Index advanced +4.95% (-5.06% YTD). Returns were the strongest in the emerging markets in comparison to more developed markets. Performance for international long/short equity funds was similar to that of US long/short equity funds, as the Hennessee International Index advanced +2.60% (-1.68% YTD). The Hennessee Macro Index advanced +1.57% for the month (+3.17% YTD). Commodities resumed their recent surge, as oil prices rose to $120 per barrel. The lone exception was gold which declined from $904 to $867 during the month, which many believe to be a seasonal adjustment in demand.