US - Hedge funds returned 1.36% for February, boosted by strong equity markets, according to Hennessee Group LLC, an adviser to hedge fund investors.
Hennessee said the Hennessee Hedge Fund Index advanced 1.36%, while all of the broad equity market indices are negative for the year through February.
According to the firm, the Hennessee Long/Short Equity Index advanced 1.18% in February.
“Equity hedge fund managers have reported to Hennessee that unlike 2003 and 2004, stock prices are reacting more in line with fundamentals,” said Charles Gradante, managing principal of the Hennessee Group LLC. “Equity managers, however, are reluctant to increase their moderate net long exposures [40% to 50%] to the equity market for fear that 2005 performance may struggle within a trading range.”
In addition, the Hennessee Arbitrage/Event Driven Index increased 0.84% in February, as gains in merger arbitrage and credit related strategies were offset by losses in convertible arbitrage, the firm said.
Gradante said: “Hennessee Group has noted a steady decline in leverage among credit and bond arbitrage managers, largely due to Fed tightening, flattening of the yield curve and tight credit spreads. Any financial crisis that usually is associated with most monetary tightening is likely to come from non-hedge fund futures managers who have increased leverage in currency, commodity and financial futures trading.”
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