Hedge funds produced a positive return of +2.55 percent on average in November, according to the Hennessee Hedge Fund Index published by the Hennessee Hedge Fund Advisory Group. But they still did worse than the market, in what was either a bear rally or the beginnings of a sustained upturn, and are down on the year as a whole.
Though hedge funds were up for the month, their performance was surpassed by the broad markets as the S&P 500 Index gained +5.85%, the Dow Jones Industrial Average rose +5.94% and the Nasdaq Index increased +11.21%. Year-to-date, hedge funds are down (-2.56%), beating the broad US equity markets, as the S&P 500 is down (-17.32%), the Dow Jones Industrial Average is down (-11.23%), and the Nasdaq is down (-24.17%). In addition, Lipper Mutual Funds are down (-18.19%) year- to-date.
“Equity hedge fund managers were up almost +4.00% in November, their strongest month this year, indicating that the worst is behind us,” says Charles Gradante, Managing Principal of Hennessee Group LLC. “However, we will likely give back 50% to 70% of our gains since our market low as unemployment, Iraq, and slow money supply growth remain issues.”
November’s lower volatility helped the equity markets to rally as the VIX index closed below 30 for the first time since June 26, 2002. High Yield hedge fund managers profited, posting a +7.40% return for the month, as default rates declined and spreads narrowed from 1100 basis points in October to 810 basis points in November. Healthcare/Biotech managers followed with a +4.66% return for the month as the sector rallied as a whole due to a high beta coefficient for most.