'Perplexed' hedgies still outpacing S&P 500 Index

The hedge fund industry saw investment returns decline by 1.4% in June. That's hardly a banner month, but the hedgies still managed to outperform the broad equity markets, which fell by 5.4% in June.
JUL 12, 2010
The hedge fund industry saw investment returns decline by 1.4% in June. That’s hardly a banner month, but the hedgies still managed to outperform the broad equity markets, which fell by 5.4% in June. “I think [hedge fund] managers are somewhat perplexed by the current investment environment,” said Charles Gradante, co-founder of Hennessee Group LLC. “Many of them view stocks to be attractively priced with low price-to-earnings ratios,” he added. “However, managers are questioning what the true values of stocks are in an environment where most developed countries have insurmountable debt with a sovereign default being a real possibility — and not just speculation.” Despite the June decline, Hennessee Hedge Fund Index’s June decline still ended up 0.2% for the first six months of the year. By comparison, the S&P 500 Index lost 7.7% of its value over the same period. From Mr. Gradante’s perspective, there are still too many unknowns for the hedge fund industry to calculate in a truly aggressive investment style. “The rebound from the worst recession since the 1930s faces added risks from Europe’s debt crisis causing managers to remain intently focused on Europe,” he said. “Increased bank funding stress and declining liquidity have been the main catalyst for the recent correction in global risk assets.”

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