New York, January 6, 2005-
Standard & Poor’s reported today that December hedge fund performance, as measured by the S&P Hedge Fund Index (S&P HFI), was up 1.23% for the month again led by strong performance from both directional and event-driven managers. Standard & Poor’s is the world’s leading provider of independent investment research, ratings and indices.
The S&P Directional/Tactical Index ended December up 1.45% led by the Equity Long/Short strategy. “After underperforming much of the year, a strong fourth quarter rally in US markets has salvaged what appeared to be a weak year for equities,” explains Charles Davidson, Senior Hedge Fund Specialist at Standard & Poor’s. “Through strong stock selection and increased market exposure, hedge fund managers were able to capture much of the positive revaluations in companies.”
Managed Futures had a difficult December as gains in European index and financial futures were negated by losses in precious metals and energy positions. Gold dropped from its year to date high as the US dollar rallied on the back of FOMC minutes supporting a stronger dollar, a technical rally on the perceived cheapness of the dollar, and intonations by the current administration that the budget deficit will be reduced sooner than later. Oil continued to slip from its yearly high with the price per barrel falling into the low $40s.
The S&P Arbitrage Index ended the month up 0.91%. As has been the case for much of the year, relative strong gains in Fixed Income Arbitrage, particularly mortgages traders, were partially offset by underperformance in both Equity Market Neutral and Convertible Arbitrage, which continue to face difficult conditions including low equity volatility.
The S&P Event-Driven Index returned 1.33% for the month as all three of the supporting sectors landed in positive territory. Distressed and Special Situations both benefited from positive reevaluation of a number of companies in the energy and technology sectors, as improving balance sheets caused upward earnings revisions. Merger Arbitrage profits, despite the announcement of a number of large transactions, remain muted.