Hedge Funds Up In March, Says Hennessee

Hedge funds produced a positive return of 0.62% in March, bringing the year to date return to +1.09%, according to the Hennessee Hedge Fund Index. The broad market indices also rallied in March, with the S&P 500 Index gaining +1.00%

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Hedge funds produced a positive return of 0.62% in March, bringing the year to date return to +1.09%, according to the Hennessee Hedge Fund Index. The broad market indices also rallied in March, with the S&P 500 Index gaining +1.00% (down -3.15% YTD) and the Dow Jones Industrial Average increasing +1.28% (down -4.19% YTD). The Nasdaq Index was up +0.27% (up 0.43% YTD).

“Credit spreads narrowed impressively preceding the war and have continued through March, with hedge funds in the High Yield sector benefiting the most from this contraction,” says Charles Gradante, Managing Principal of Hennessee Group LLC. “Greenspan’s monetary easing is helping balance sheet issues among lower credits.”

The Hennessee Latin America Index was March’s top performer with a return of +8.20% (+5.04% YTD), bouncing from the position of being February’s worst performing strategy. Brazil was the main driver in the region as it managed to receive another $4.1 billion from the IMF and lowered its account deficit in February to $197 million (from $1.1 billion a year earlier). The second best performer for the month was the High Yield Index, with a return of +2.43% (+6.70% YTD). As geopolitical uncertainties ease, speculative asset classes (namely high yield and distressed) are the main beneficiaries. In third position was the Healthcare and Biotech Index, posting a return of +2.34% (+1.43%YTD) for March due to positive news that large employers expect HMO premium increases of between 14-15% and that cost trends are stable.

“Although we are still in a trader’s market, stock picking for long and short positions is becoming more fundamentally driven as the Iraq war moves toward a visible conclusion,” says Gradante.

The Pacific Rim Index posted a -1.67% (-2.65%) return in March, the worst performing strategy for the month. The outbreak of SARS brought many firms in the Southeast Asian region to a standstill and news of fraudulent accounting at SK Global in Korea shattered investor’s confidence. The Macro Index followed with a loss of -1.25% (+3.24% YTD) as trades that made them the top performer in February (long bonds/short equities; long oil and gold) moved against them very quickly. The emerging Markets Index rounded out the bottom three with a loss of -0.82% (-0.67% YTD).

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