Hedge funds followed by the Hennessee Hedge Fund Index produced a positive return of +2.13% in December, bringing 2004 returns to +8.27%.
The broad market indices were also positive for the month as the S&P 500 climbed +3.40% in December (+10.87% YTD), the Dow Jones Industrial Average rose +3.40% (+3.15% YTD), and the NASDAQ Composite Index gained +3.75% (+8.60% YTD).
“Hedge funds did well in 2004, however, any chance of outperforming the broad market was stifled by a narrow trading range in equities for the first three quarters, very similar to the trading range in 1994,” says Charles Gradante, Managing Principal of Hennessee Group LLC.
“We believe 2005 will present more opportunities on the short side, as Fed tightening reduces liquidity which in turn will improve returns from equity and bond shorts as the market becomes more risk averse and volatility increases.”