June 11, 2007 – New York, NY – Hennessee Group LLC, an adviser to hedge fund investors, today announced that the Hennessee Hedge Fund Index advanced +2.45% in May (+7.86% YTD), while the S&P 500 rose +3.26% (+7.94% YTD), the Dow Jones Industrial Average increased +4.32% (+9.34% YTD), and the NASDAQ Composite Index advanced +3.15% (+7.84% YTD). Bonds sold off in May, as the Lehman Intermediate Government Corporate Bond Index declined -0.64% (+1.43% YTD).
“All hedge fund strategies posted positive returns in May, with the exception of short biased funds,” said E. Lee Hennessee, Managing Principal of Hennessee Group LLC. “The strong performance is an indication that many funds have expanded their net exposures and become more fully invested, although short selling has again become more difficult over the last two months.”
The Hennessee Long/Short Equity Index advanced +2.39% in May (+7.37% YTD). The equity markets continued their recent momentum, as the S&P 500 reached an all time high and the Dow Jones Industrial Average extended its run into record territory. Despite the positive environment in May, equities have thus far pulled back in early June reflecting increased concerns about inflation, interest rates and volatility in the Chinese equity markets.
“Leveraged buyout activity has been one of the underpinnings of the stock market’s rally in the past year,” said Charles Gradante, Managing Principal of Hennessee Group LLC. “Should bond yields continue to increase, LBO activity could be somewhat curtailed, posing a risk to equity prices.”
The Hennessee Arbitrage/Event Driven Index increased +1.79% in May (+7.46% YTD), as credit, convertible, and event driven strategies all posted strong returns. The Hennessee Distressed Index gained +2.36% (+9.52% YTD), as corporate bond spreads again continued to tighten. Merger and acquisition activity remained robust in May, causing the Hennessee Merger Arbitrage Index to advance +1.90% (+9.19% YTD). Several large leveraged buyouts were announced in addition to a number of strategic mergers. The Hennessee Convertible Arbitrage Index advanced +1.28% (+5.05% YTD), as convertible issuance was again robust.
The Hennessee Global/Macro Index advanced +3.09% in May (+8.73% YTD). International equities were again strong, as the Hennessee International Index advanced +2.91% (+9.57% YTD), led by excellent performance in Latin American countries. The Hennessee Macro Index advanced +3.22% (+6.30% YTD) in May, as the index experienced its largest monthly increase since 2003. In addition to contributions from long equity exposure, macro funds also benefited from a back up in Treasury yields, as the 10 Year yield rose from 4.6% to 4.9%.
“The Hennessee Group is concerned about China,” continued Mr. Gradante. “China’s GDP is 80% export related with insufficient internal consumption. Furthermore, we’re concerned that China’s economy is overheating, the stock market is a bubble, real interest rates are negative with 2.5% interest on savings and 3% inflation, and government owned banks have a lending problem.”
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.
