Returns Rise In November, Year-End Could Bring Rally

Dec 8 2005 | 5:06pm ET

After a tough ten months and an especially ugly October, hedge fund returns showed improvement in November, and some industry experts are optimistic that things may pick up further in December.

According to Hedge Fund Research, market directional funds showed the best performance during the month, up 3.58%, with global macro coming in second, up 3.13%. The worst performer was convertible arbitrage, which was down 0.33%.

Conrad Gann, president and chief operating officer of TrimTabs Investment Research, attributes November’s improved hedge fund performance to a large number of share buybacks and strong merger and acquisition activity.

“November had $71.2 billion in [share] buybacks, which is the highest we have on record,” said Gann, referring to TrimTabs’ historical data research. It was also “a strong month for announced mergers and acquisitions which involved cash,” he said.

HFR’s Merger Arbitrage Index was up 0.92%, while its Event Driven Funds Index, which tracks funds that also bet on M&A activity, showed returns of 1.49%.

Victor Park, director of Alternative Investment Asset Management, believes that there is a strong possibility of a yearend rally.

“It’s a stock pickers market,” he said. “I think the mood is ‘let it rip.’”

As for 2006, Gann believes that a hot space to be in will be multi-strategy funds. “Multi-strategy funds that can flexibly allocate will continue to gather assets,” said Gann.

Park said, with all of the cash sloshing around these days, “equities aren’t a bad place to be.”  

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