Hennessee, RBC Indices Show Widespread Hedge Fund Losses

Date: Monday, December 17, 2007
Author: FINalternatives

A pair of indices show widespread misery for hedge funds last month. Just one of nine sectors tracked by the RBC Hedge 250 Index was in positive territory in November: Managed futures added 0.35%, bringing its year-to-date return to 11.51%.

Overall, the RBC Index was down 1.46% on the month (up 7.78% YTD), while the Hennessee Hedge Fund Index fell 1.58% (up 11.94% YTD). But, as Hennessee Group managing principal E. Lee Hennessee points out, hedge funds manage to lose less than the broader markets, as the Standard & Poor’s 500 Index fell more than 4%, leaving it up just 4.45% in 2007.

“November was a good example of the value that hedge funds provide to investors, as losses by hedge funds are generally less than those of the overall market in periods of turbulence,” she said. “The increase in equity volatility has provided good opportunities for long/short equity strategies this year, although arbitrage strategies have not fared as well.”

Such sentiments are not likely to assuage investors in mergers and special situations funds, which RBC says fell 3.11% (up 9.03% YTD). Hennessee’ arbitrage and event-driven index, for its part, was down about half that with a loss of 1.61% (up 7.56% YTD), while its merger arbitrage index dropped 1.69% (up 13.26% YTD).

Also suffering a rough November were convertible arbitrage funds, which Hennessee says fell 2.04% (up 3.01% YTD) and RBC says dropped 2.07% (up 1.29% YTD).

Other decliners in the Hennessee index include global macro (down 1.68% in November, up 15.84% YTD), long/short equity (down 1.56%, up 12.57% YTD) and distressed (down 1.21%, up 9.37% YTD).