The seeming imperturbability of the hedge fund industry suffered a blow today when the Hennessee Hedge Fund Advisory Group announced that the funds in its index produced a negative return of -0.33% in February.
Hennessee notes that two of the broad market indices were down even further, with the S&P 500 Index falling off 1.55% and the Dow Jones Industrial Average declining 2.02%. However, the Nasdaq Index was up +1.26%.
“The equity market looks like it will at least retest the October lows, where
there
is
major
institutional
support which should create opportunities for hedge fund managers who are holding cash,” says Charles Gradante, Managing Principal of Hennessee Group LLC. “In the meantime, it is very difficult to capitalize on opportunities to make money when the market is in a trading range.”
The Hennessee Macro Index was February’s top performer with a return of +2.29%.It is also the top year to date performer, with a return of +4.30%.The significant decline in the US dollar against the yen and the euro as well as the increased interest in gold has given Macro managers many opportunities.
The second best performer for the month was the Convertible Arbitrage Index, with a return of +0.89%. Steady credit spreads and high volatility (as measured by the VIX), both favorable conditions for convertible arbitrage hedge fund managers, helped to boost returns.
Tying for third position was the High Yield Index and the Regulation D Index, both posting returns of +0.76% for February.
“Macro managers have succeeded so far this year by playing in their niche: long bond futures, short equity futures, long gold, and short the US dollar,” adds Gradante.
Latin America hedge funds managers posted a -3.12% return, the worst performing strategy for the month, mostly attributable to the weak economic environment and political uncertainty in South America. Telecom and Media followed with a loss of -1.97% as media companies continue to struggle from lack of advertising dollars. Financial Equities rounded out the bottom three with a loss of -1.34%, mainly due to weak economic data, particularly consumer confidence.