December 6, 2004 - New York, NY – Hennessee Group LLC today announced that, contrary to the perception of most Wall Street pundits, there are several overlooked “players” in the financial markets that exert more influence over equity, bond, and commodity markets than hedge funds.
“Most Wall Street pundits have persuaded the financial media to believe that the ‘elephant in the swimming pool’ is the hedge fund, which is continuously reported to have been the major contributing cause for the recent equity bear market and currently is being cited as the ‘speculator’ who is pushing the dollar to lower levels and oil to $55 per barrel,” says Charles Gradante, managing principal of Hennessee Group LLC. “It is true that hedge funds have the capability of executing bullish and bearish strategies through the cash, forward, and futures markets. Perhaps it is because of this capability that many have rushed to the conclusion that ‘if it looks like a duck and acts like a duck, then it must be a duck,’” he stated.
Hennessee Group’s research on the hedge fund industry, dating back to 1987, does not support the “duck” theory. Neither the financial media nor Wall Street pundits have provided facts to substantiate any of their claims. Hennessee Group proposes the following questions, the answers to which should cause hesitation by those who are quick to point the finger at hedge funds:
- Where were hedge funds in the 1970s when oil went from $12 per barrel (1972) to $58 per barrel (1981)?
- Where were hedge funds when gold went from $32 per ounce (1970) to $850 per ounce (1980)?
- Where were hedge funds when the US dollar collapsed in the 1980s (50% decline in dollar vs. yen from 1985 to 1988)?
- And yes, where were hedge funds when the market crashed in 1987?
The fact is hedge funds were such an insignificant factor that they were not even in Wall Street’s vocabulary during the 1970s and 1980s. This is not to say that hedge funds are not a factor in current capital markets, but it is to suggest that the market forces and participants that existed prior to the prominence of hedge funds in the 1990s are still present and still the predominant factor, not hedge funds.
Those who speculate on how hedge funds impact markets today should re-examine history and recognize that there are “players” in both the financial and commodity markets who are not hedge funds, but who were around in the 1970s and 1980s. Perhaps writing about these “players” would require a view that is contrary to the “lynch mob” mentality regarding hedge funds. How soon we forget history and how quickly we find new scapegoats for convenience and profit.
About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults direct hedge fund investors 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.
