Short-Biased, Telecom Hedge Funds Shine In June

Jul 10 2007 | 11:10am ET

For all the doom-and-gloom headlines about declining equities markets and hedge funds burned by the growing sub-prime debacle, hedge funds did quite well in June. The Hennessee Hedge Fund Index rose 0.88% and is up 8.71% year-to-date, the Hennessee Group said today.

Short-biased, telecom and media, Asia-Pacific and Latin America funds buoyed the index, while the declining equities market gave the Standard and Poor’s 500 a beating. It fell 1.66% last month (6.96% YTD). Fully half of the more than 1,000 managers covered by the Hennessee indices have topped the S&P500 in the first half of 2007.

“Despite significant losses incurred by several funds focusing on mortgage-backed securities, it was generally a very good month for hedge funds,” Hennessee Group managing principal E. Lee Hennessee said. “Of note, long/short equity funds actually benefited from the collapse in sub-prime mortgages via their short exposure to lenders and ABX indices.”

The Hennessee Long/Short Equity Index rode its sub-prime gains to buck the falling long market, adding 0.84% in June (8.43% YTD). Short-biased funds, of course, simply rode the market to only their second up month of the year, rising 2.85%, tops among Hennessee-tracked strategies. But the months-long market rally has taken its toll as the Short-Biased Index remains mired in the red, down some 4.01% this year.

Telecom and media funds also enjoyed a strong June, rising 2.36% (8.87%). Among regional strategies, Latin America and Asia-Pacific remain the top two strategies in the Hennessee indices, rising 0.46% (16.22% YTD) and 2.58% (11.14% YTD), respectively.

In spite of the market’s decline, only two strategies found themselves in negative territory for June: distressed funds, down 0.32% (up 8.9% YTD), and merger arbitrage funds, down 0.2% (up 9.78% YTD).

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