FOR IMMEDIATE RELEASE
Press Contacts:
Alexander Smith-Ryland
Hennessee Group LLC
Smithryland@hennesseegroup.com
212.857.4444
International Hedge Funds Capitalize On Foreign Equity Rally In June
Weak US Dollar Puts Pricing Power Back in the Hands of US Companies
July 9, 2003 - New York, NY -- The Hennessee Hedge Fund Advisory Group (“Hennessee Group
LLC”), a global hedge fund investment consulting firm, which advises individuals and institutions
on over $1 billion in assets, today announced that hedge funds produced a positive return of
+1.50% in June, bringing the year-to-date return to +8.98%, according to the Hennessee
Hedge Fund Index®. The broad market indices also rallied in June, with the S&P 500 Index
gaining +1.28% (+11.79% YTD) and the Dow Jones Industrial Average increasing +1.53%
(+7.73% YTD). The Nasdaq Index was up +1.68% (+21.51% YTD).
“As the equity markets rallied in April, May, and June on expectations of an economic
turnaround, hedge funds demonstrated an ability to recognize market direction and increased
their net exposure in a timely manner, thereby capturing most of the upside move in the
broad market,” stated Charles Gradante, Managing Principal of Hennessee Group LLC.
The Hennessee Pacific Rim Index was the top-performing index in June, with a return of +3.42%
(+5.28% YTD). Korean, Chinese, and Taiwanese equity markets bounced back from the SARS
effects, in what some may call a “relief rally”. China was the main contributor as its currency,
effectively pegged to the US dollar, made Chinese products more competitive abroad. The second
best performer for the month was the Hennessee Distressed Index, with a return of +2.79%
(+13.41% YTD).
The rising equity market and strong indications of an economic recovery
bolstered the asset class as a whole, with the average high yield bond now trading at $0.99 on the
dollar. In third position was the Hennessee International Index, posting a return of +2.73%
(+9.91%YTD) for June, as positive news came out of Germany and Argentina for the first time in
months.
The Hennessee Short Biased Index posted a –5.03% (-14.20% YTD) return in June, the worst
performing strategy for the third month in a row. Short sellers were caught shorting stocks with
weak balance sheets but high betas and renewed prospects for growth. The Hennessee Convertible
Arbitrage Index posted its first down month in 2003 with a loss of –0.53% (+7.01% YTD) due to
premium contraction across the board, as implied volatility fell to near all time lows. Additionally,
issuance through June 2003 exceeded issuance for the entire year 2002, most at “rich premiums”,
creating supply and demand imbalances.
“Global deflationary forces, coupled with the need to wipe out the excesses of the 1990’s, are
creating an opportunity for increased mergers and acquisitions,” said Mr. Gradante. “We
expect investor money that left merger arbitrage hedge funds in 2002 to return in 2004.
Consolidation in almost all sectors is the low cost alternative for increasing revenues and
earnings.
Merger and acquisition activity should increase in line with economic
improvements and continued cheap cost of capital.”
About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults hedge fund investors on
asset allocation, manager selection, ongoing monitoring of hedge fund managers and asset
reallocation. Hennessee Group LLC can act as a discretionary or non-discretionary hedge fund
portfolio adviser. The Hennessee Group does not market individual hedge fund managers nor fundof-funds.
®
Description of Hennessee Hedge Fund Index
The Hennessee Hedge Fund Indices
®
are calculated from performance data supplied by a
diversified group of hedge funds monitored by the Hennessee Group LLC. The Hennessee Hedge
®
Fund Index is believed to represent at least half of the capital in the industry and is an equally
®
weighted average of the funds in the Hennessee Hedge Fund Indices . The funds in the Hennessee
®
Hedge Fund Index are believed to be statistically representative of the larger Hennessee Universe
of over 3,000 hedge funds and are net of fees and unaudited. Past performance is no guarantee of
future returns. ALL RIGHTS RESERVED.