Hedge funds on upswing, but lag behind broader indexes

Hedge funds gained almost 4% in April, but failed to keep pace with the surging broad market indexes. Conservative positioning held back a lot of alternative strategies last month, according to Charles Gradante, principal of Hennessee Group LLC, a New York hedge fund advisory firm. “While we have some improvement in data, most funds remain conservatively positioned,” he said in a statement. “Funds are cautious and will wait for fundamentals to improve before significantly expanding their net exposures.” The Hennessee Hedge Fund Index gained 3.8% in April and is up 5% from the start of the year. This compares with a 9.4% gain by the Standard & Poor’s 500 stock index last month. The S&P still was down 3.4% over the first four months of the year. The Barclays Aggregate Bond Index gained 0.5% in April and is up 0.6% year to date. From the March 9 stock market low, the equity markets have experienced their strongest rally in 70 years, which is fueling further investor momentum, Mr. Gradante said. “A lot of the negatives that have people on the sidelines have already been discounted by the markets,” he said. “At current levels, the market as a whole is trading close to 16 times forward earnings, which is not undervalued. I expect to see a correction in the short term, as this market has gotten ahead of itself.”