May 8, 2007 – New York, NY – Hennessee Group LLC, an adviser to hedge fund investors, today announced that the Hennessee Hedge Fund Index advanced +1.92% in April (+5.44% YTD), while the S&P 500 rose +4.33% (+4.53% YTD), the Dow Jones Industrial Average increased 5.74% (+4.81% YTD), and the NASDAQ Composite Index advanced +4.27% (+4.54% YTD). Bonds also appreciated in April, as the Lehman Intermediate Government Corporate Bond Index advanced +0.48% (+2.08% YTD).
“While the strong equity markets have been a wind at the back of hedge fund performance, most funds continue to be relatively conservatively positioned,” said E. Lee Hennessee, Managing Principal of Hennessee Group LLC. “Many are concerned about the continued deterioration in housing, increasing inflation, extraordinarily tight credit spreads, and a weak dollar.”
The Hennessee Long/Short Equity Index advanced +1.85% in April (+5.15% YTD). First quarter earnings reports were generally better than expected, acting as a catalyst for the Dow Jones Industrial Average to eclipse 13,000 and again set new all-time highs.
“While first quarter GDP growth of +1.3% failed to meet expectations, the majority of the decline in growth was due to housing,” said Charles Gradante, Managing Principal of Hennessee Group LLC. “Given the decline in housing, most managers have been surprised about the strength of consumer spending, which represents two-thirds of the overall U.S. economy.”
The Hennessee Arbitrage/Event Driven Index increased +1.61% in April (+5.72% YTD). Credit and event driven strategies posted strong returns, over-shadowing muted convertible arbitrage returns. The Hennessee Distressed Index posted a gain of +2.09% (+6.91% YTD), as corporate bond spreads again continued to tighten. Merger arbitrage experienced yet another positive month, as the Hennessee Merger Arbitrage Index advanced +1.77% (+5.80% YTD). The positive equity markets, combined with a heavy amount of new deal flow, caused a favorable environment for merger arbitrage. The Hennessee Convertible Arbitrage Index advanced +0.15% (+3.58% YTD), although it was a somewhat difficult month as many funds posted negative performance. Convertible issuance was again robust, causing the market to cheapen as it digests the increase in supply.
The Hennessee Global/Macro Index advanced +2.32% in April (+5.33% YTD). While international equity markets generally performed in line with U.S. equity markets, the Hennessee International Index advanced +3.32% (+6.72% YTD) in April, outperforming its U.S. brethren. The Hennessee Macro Index advanced +1.97% (+3.34% YTD) in April. In addition to contributions from long equity exposure, macro funds also benefited from weakness in the U.S. dollar, as the Euro advanced from $1.33 to $1.37.
“Most macro managers are concerned about the dollar, as interest rates in Europe continue to increase and the current account deficit is now 7% of GDP, which is an all-time high for the U.S.,” stated Mr. Gradante. “Fundamentals are strong in the economy and the market, however, a free fall in the dollar is the Achilles’ heel of this market.”
About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults direct investors in hedge funds on asset allocation, manager selection, and ongoing monitoring of hedge fund managers. Hennessee Group LLC is not a tracker of hedge funds. The Hennessee Hedge Fund Indices® are for the sole purpose of benchmarking individual hedge fund manager performance. The Hennessee Group does not sell a hedge fund-of-funds product nor does it market individual hedge fund managers. For additional Hennessee Group Press Releases, please visit the Hennessee Group’s website. The Hennessee Group also publishes the Hennessee Hedge Fund Review monthly, which provides a comprehensive hedge fund performance review, statistics, and market analysis; all of which is value added to hedge fund managers and investors alike.
Description of Hennessee Hedge Fund Indices®
The Hennessee Hedge Fund Indices® are calculated from performance data reported to the Hennessee Group by a diversified group of over 1,000 hedge funds. The Hennessee Hedge Fund Index is an equally weighted average of the funds in the Hennessee Hedge Fund Indices®. The funds in the Hennessee Hedge Fund Index are derived from the Hennessee Group’s database of over 3,500 hedge funds and are net of fees and unaudited. Past performance is no guarantee of future returns. ALL RIGHTS RESERVED. This material is for general information only and is not an offer or solicitation to buy or sell any security including any interest in a hedge fund.
