February 11, 2015 – New York, NY – Hennessee Group LLC announced today that the Hennessee Hedge Fund Index gained +0.30% in January (+0.30% YTD), while the S&P 500 lost -3.10% (-3.10% YTD), the Dow Jones Industrial Average lost -3.69% (-3.69% YTD), and the NASDAQ Composite Index sunk -2.13% (-2.13% YTD). Bonds were positive on the month, as the Barclays Aggregate Bond Index increased +2.10% (+2.10% YTD).
“Hedge funds outperformed the market by 340 basis points in January, largely due to equity hedging to protect capital and macro plays in currencies, bonds and commodities.” commented Charles Gradante, Co-Founder of Hennessee Group LLC. “Long dollar against short yen and short euro worked well. Long bonds also contributed as bonds had one of their biggest rallies in years due to a flight to quality by foreign investors and a rising dollar.”
"The top three strategies for the month were Macro (+3.93%), International (+2.67%) and Asia-Pacific (+2.59%).” highlighted Charles Gradante. "The bottom three strategies for the month were Latin America (-5.19%), Distressed (-4.37%) and Value (-2.10%).”
During January the VIX experienced another bumpy and eventful month. Starting the month around 19, volatility soon increased as equity and energy markets sold off and the VIX jumped above 22, a gain of over 15%. Volatility subsided quickly and the VIX dropped back down below 16, however, as volatility picked up near the end of the month, the VIX rose back up to finish the month above 19.
Equity long/short hedge funds were negative for the month, as the Hennessee Long/Short Equity Index lost -0.59% (-0.59% YTD). The best performing sectors were utilities (+2.34%), health care (+1.17%), and consumer staples (-1.27%), while underperforming sectors were financials (-6.99%), energy (-4.88%) and information technology (-3.91%). The utilities sector starts off 2015 as the best performing sector for the year having gained +2.34% YTD through January, while financials is bringing up the rear, having lost -6.99% YTD through January.
“The world is not only awash in oil inventory but also awash in confusion over the viability of the EU now and in the future with both crises creating a roller-coaster ride in January as the market failed to successfully gain traction on any rally.” reported Charles Gradante. “The ‘bi-polar’ market was rattled by declines in oil and unrest about Greece leaving the EU. One manager reported that Greece leaving the EU was not the issue but the feeling that any concessions were impossible unless they were also offered to Spain, Portugal and Italy…a proposition not palatable to Germany.”
The Hennessee Arbitrage/Event Driven Index decreased -0.64% in January (-0.64% YTD). The Barclays Aggregate Bond Index gained +2.10% (+2.10% YTD) as interest rates were lower for the month. High yield decreased as the Merrill Lynch High Yield Master II Index gained +0.69% in January (+0.69% YTD). High yield spreads were higher in January, increasing 22 basis points to end the month 526 basis points over treasuries. The Hennessee Distressed Index was negative for the month by -4.37% (-4.37% YTD). The Hennessee Merger Arbitrage Index gained +0.03% for the month (+0.03% YTD). The Hennessee Convertible Arbitrage Index was negative for the month, losing -0.73% (-0.73% YTD).
“While macro managers were planning to press the bets that worked well in January, equity managers began February in a defensive mode looking for more clarity from the February Q4 earnings calendar and a plan for Greece. Equity managers want to put on more risk and more beta but this liquidity driven market has hurt the strategy on the short side of the portfolio as all stocks, good and bad, continue to correlate to each other.” stated Charles Gradante.
The Hennessee Global/Macro Index gained +1.94% in January (+1.94% YTD). The Dow Jones UBS Commodity Index was lower in January, dropping -3.34% (-3.34% YTD), while the MSCI ACWI Index lost -1.63% (-1.63% YTD) and the MSCI EAFE Index gained +0.44% (+0.44% YTD). The Hennessee International Index gained +2.67% for the month (+2.13%). The MSCI Emerging Market Index gained +0.55% (+0.55% YTD), while hedge fund managers slightly underperformed the index, as the Hennessee Emerging Market Index only gained +0.12% (+0.12% YTD).
The Hennessee Macro Index increased +3.93% for the month of January (+3.93% YTD). Fixed income managers were positive in January as bond yields were slightly lower for the month with the 10-Year U.S. Treasury ending the month at 1.68%, down 49 basis point from 2.17% in December. Commodities were mostly negative for January, with WTI oil dropping -10.59% and European Brent Blend Crude sinking -14.02%. Natural gas was also negative in January, ending the month with a loss of -8.28%.
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Description of Hennessee Hedge Fund Indices®
The Hennessee Hedge Fund Indices® are calculated from performance data obtained from publicly available information, internally developed data and other third party sources believed to be reliable. The Hennessee Hedge Fund Index is an equally-weighted average of the funds in the Hennessee Hedge Fund Indices®. Hennessee Group has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness, or reliability of such information. Past performance is no guarantee of future returns.