Hedge Funds Track Higher in April, Short Bias Bashed

The Hennessee Latin America Index was the top performer for the second month in a row with a solid April return of 14.61%, and a 19.63% gain year to date. Brazil was the main driver in the region once again as US Treasury Secretary John Snow said he was “deeply impressed” by Brazil’s new government and market perception has seemingly turned from distrust to near confidence.

Additionally, Argentina’s GDP grew by 5.8% in the first quarter and its industrial production was 21.4% higher than this time last year. The second best performer for the month was the Financial Equities Index, with a gain of 8.23% (7.42% year to date). April marked the seventh straight month in which spreads have narrowed; they are now back to where they were before March 2000. In third position was the Telecom and Media Index, posting a return of 5.84% (5.08% year to date) for April boosted by the large Nasdaq increase and AOL’s share price jumping 26%.

The upswing in equity markets weighed on the Short Biased Index, which gave back 5.47% in April (-6.92% year to date), the weakest monthly performer.   Hedge fund managers holding large short positions were caught out by the market’s quick turnaround and could not cover their shorts in time to completely mitigate losses, according to the Hennessee analysis.

The Market Neutral Index followed with a loss of 0.23% (-0.39 year to date) as market neutral manager’s shorts appreciated slightly more than their longs. The Regulation D Index rounded out the bottom three with a gain of 0.44% (2.31% year to date).

For the previous month, the Hennessee Index produced a return of 0.62% (See  Hedge Funds Up Slightly in March  ).