The Hennessee Hedge Fund Advisory Group, a hedge fund adviser and creator of a range of hedge fund indices, has just published its Hennessee Technology index for 2000, showing a gain of 12.43% for the year, compared with the Nasdaq's loss of 39.72%.
Hedge funds' crucial ability to short the market, so important in a bear market, allowed the overall Hennessee Hedge Fund index to gain 7.88% net of fees in 2000 - the S&P 500 dropped 9.36% and the Dow Jones fell 5.60%. The Hennessee Healthcare/Biotech index gained 62.37%.
These results show that hedge funds, which have the ability to take short positions, outperformed the traditional equity markets in 2000. Shorting allows a hedge fund manager to maintain a low net exposure to the market and high levels of cash, eliminating most market risk. Hedge funds, which are traditionally viewed as being riskier than conventional equity funds, are in fact probably less risky during bear markets, and the irrational caution of regulators, which impedes the access of investors to hedge funds, especially in Europe, has almost certainly cost them money during 2000 - the exact opposite of what the regulators claim they set out to achieve. How about a class action against the UK's FSA alleging negligence in fulfilling its statutory duty to protect the public interest?
The Hennessee Hedge Fund index was created in 1987 and is comprised of 22 management styles. The index, updated on a monthly basis, is an equally weighted index with almost 500 hedge fund managers selected from a proprietary database of more than 3,000.
The Hennessee Hedge Fund Advisory Group specialises in creating diversified hedge fund portfolios, as well as assisting investors in evaluation and asset reallocation on pre-existing hedge fund portfolios. Most recently, the group forged an alliance with MassMutual Financial Group to identify and monitor hedge funds investments to be used in the creation of new insurance products.
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