December 2, 2013 – New York, NY – Hennessee Group LLC, an adviser to hedge fund investors, believes the equity markets are likely to continue their momentum heading into the end of the year and lead to additional gains for investors during the month of December. Charles Gradante, Co-Founder of the Hennessee Group, stated “We believe the ‘December Effect’, whereby investors choose to defer paying taxes on equity market gains until the following year, will provide additional support to the equity markets as we close out the year.”
Gradante added, “In addition, hedge funds have experienced gains in December over 93% of the time during these same calendar year periods.”
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YTD Performance Through November |
December Performance |
Year |
S&P 500 Index |
Hennessee Hedge Fund Index |
S&P 500 Index |
Hennessee Hedge Fund Index |
1995 |
34.98% |
15.79% |
1.93% |
1.65% |
1996 |
25.44% |
17.67% |
-1.98% |
1.20% |
1997 |
31.11% |
16.84% |
1.72% |
1.16% |
1998 |
21.57% |
-0.28% |
5.76% |
1.70% |
1999 |
14.31% |
22.57% |
5.89% |
6.70% |
2003 |
22.27% |
16.75% |
5.24% |
1.76% |
2004 |
7.23% |
6.31% |
3.40% |
1.82% |
2005 |
4.88% |
6.10% |
0.03% |
1.66% |
2006 |
14.19% |
9.99% |
1.40% |
1.28% |
2007 |
6.23% |
10.85% |
-0.69% |
0.33% |
2009 |
24.07% |
22.48% |
1.93% |
2.23% |
2010 |
7.86% |
6.89% |
6.68% |
2.80% |
2011 |
1.08% |
-4.20% |
1.02% |
-0.42% |
2012 |
14.96% |
5.47% |
0.91% |
1.45% |
Positive |
14 |
12 |
12 |
13 |
“DECEMBER EFFECT”: EQUITY MARKETS AND HEDGE FUNDS
Hennessee Group recently conducted a brief study examining the historical performance of the equity markets and hedge funds when entering the final month of the year with positive year-to-date gains. Hennessee Group focused on the calendar year periods dating back to 1995; using the S&P 500 Total Return Index and the Hennessee Hedge Fund Index as proxies. As illustrated in the chart below, dating back to 1995, the S&P 500 Index has generated positive returns through November in fourteen calendar year periods and experienced additional gains in December 86% of the time. In comparison, hedge funds managed to generate gains in twelve of the calendar year periods the S&P 500 Index was positive through November and experienced gains in December 93% of the time.
Dean Rubino, President of Terrapin Asset Management, LLC, stated, “The data supports the ‘December Effect Theory’ and bodes well for investors as we close out 2013. Hennessee Research indicates that when the equity markets were positive through November, they gained on average +2.4% in December while hedge funds gained +1.8%.”
OPTIMISTIC HEDGE FUND OUTLOOK FOR 2014
While the Hennessee Group is optimistic for both the equity markets and hedge funds heading into the final month of the year due to the “December Effect”, we are more optimistic that hedge funds are well positioned for a good year on a relative basis in 2014. The Hennessee Group believes fundamentals will matter again in the coming year which should lead to an increase in dispersion between sectors and individual stocks, particularly as the rally gets long in the tooth. In addition, the equity markets are likely to trade in a range as opposed to trend in one particular direction in 2014. The Hennessee Group believes such an environment should favor hedge funds relative to their traditional counterparts as they will have the opportunity to generate alpha on the both the long and short side of their portfolios while not having to rely on market direction or beta for returns.
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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 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.
