New York (HedgeCo.net) – Hedge funds that invest in distressed assets rebounded and posted increases in July after two straight months of declines, according to Hennessee Group. The Hennessee Hedge Fund Index advanced +1.91% in July (+1.86% YTD), while the S&P 500 increased +6.88% (-1.21% YTD), the Dow Jones Industrial Average climbed +7.08% (+0.36%), and the NASDAQ Composite Index advanced +6.90% (-0.64% YTD). Bonds advanced, as the Barclays Aggregate Bond Index increased +1.07% (+6.46% YTD).

“Hedge fund managers lagged the broader markets due to defensive portfolio positioning. Managers began July with lower than average exposures after significantly reducing gross and net exposure levels during May and June. As a result, hedge funds lagged as equity markets rose sharply,” said Lee Hennessee, Managing Principal of Hennessee Group. “On a positive note, we are encouraged to see that performance was partially driven by stock selection, rather than only directional market exposure. Stocks started to respond more to fundamentals as quarterly earnings were reported, a constructive development for hedge funds.”

“The economy is at an inflection point. Leading economic indicators are peaking with no real improvement in employment,” commented Charles Gradante, Co-Founder of Hennessee Group. “A double dip recession remains a possibility, but most managers feel that it is more likely that the U.S. economy experiences an extended period of slow growth due to weak consumption, withdrawal of fiscal stimulus and continued deleveraging. Several have referred to this as the ‘New Normal’. This would likely lead to financial markets being range bound, which should be a somewhat favorable environment for stock selection and for hedge funds.”

Editing by Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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