November 8, 2007 – New York, NY – Hennessee Group LLC, an adviser to hedge fund investors, today announced that the Hennessee Hedge Fund Index advanced +2.88% in October (+13.65% YTD), while the S&P 500 advanced +1.48% (+9.26% YTD), the Dow Jones Industrial Average increased +0.25% (+11.76% YTD), and the NASDAQ Composite Index rose +5.83% (+18.37% YTD). The Lehman Aggregate Bond Index advanced +0.90% (+4.78% YTD).
“As a whole, hedge funds continue to post excellent returns relative to U.S. equities, as the environment has been very conducive to stock picking in recent months,” said E. Lee Hennessee, Managing Principal of Hennessee Group. “Exposure to technology and international equities continued to be beneficial to hedge funds in October.”
The Hennessee Long/Short Equity Index advanced +2.84% in October (+14.06% YTD). U.S. equities posted marginal gains in October, as a late month rally in anticipation of the Fed’s rate cut erased losses experienced earlier in the month.
“Should weakness in housing cause a substantial slowdown in consumer spending, equities would clearly be at risk, as consumer spending represents 70% of U.S. GDP,” said Charles Gradante, Managing Principal of Hennessee Group. “However, the consumer has proven to be very resilient thus far, evidenced by third quarter GDP growth of 3.9% and consumer spending growth of 3.1%.”
The Hennessee Arbitrage/Event Driven Index advanced +1.96% in October (+9.32% YTD). Merger spreads continued to tighten after widening substantially throughout the summer. The Hennessee Merger Arbitrage Index rose +2.30% in October (+15.65% YTD), as most managers apparently avoided the small number of broken deals during the month. Convertible arbitrage experienced its best month of the year, as the Hennessee Convertible Arbitrage Index rose +1.64% (+5.25% YTD). Convertible valuations generally richened, despite the fact that volatility (in terms of the VIX) was lower by month end. The Hennessee Distressed Index advanced +1.91% in October (+9.65% YTD), as most credit strategies performed well in October, despite slightly wider credit spreads.
The Hennessee Global/Macro Index advanced +3.87% in October (+17.83% YTD), as global equity markets, especially Asia and Europe, posted gains. Of note, the Dow Jones China 600 Index is up +158% for the year, as liquidity continues to drive performance of the Chinese stock market. The Fed’s rate cut on October 31 placed additional downward pressure on the U.S. dollar, as the Euro reached an all-time high of $1.457 and the U.K. sterling reached a 26-year high of $2.09. Oil prices also reached an all-time high, ending the month at $96 per barrel.
“The Federal Reserve appears to have some room to continue lowering rates, as inflation readings indicate prices are rising by 2% per annum and productivity came in strong,” continued Mr. Gradante. “However, record oil prices and lower interest rates point to slow growth with GDP expected to be less than 2% in coming quarters. The Fed and Treasury’s best move is to sell gold and buy dollars. That would support the dollar and assist the economy.”
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.
