The Hennessee Hedge Fund index posted a 4% gain in 2001, topping the -3% return for the S&P 500 index and -21% for the Nasdaq composite. The Russell 2000 index returned 1% for the same period. Nearly 90% of the approximately 500 managers in the Hennessee index outperformed the S&P 500 in 2001.
Equities managers that invest in and short financial institution stocks produced the biggest returns in the Hennessee index for 2001, almost 16%. Convertible arbitrage managers returned 15% for the same period, and short-biased strategies took advantage of soft equity markets, returning 13%. Latin American hedge fund managers took the biggest hit in 2001, returning -10%.
The overall index posted a 1.6% gain for December, beating the S&P 500 and the Nasdaq, each of which gained 1%. The Russell 2000 gained 6% for the month. Latin American managers outperformed their closest peers by 6.5 percentage points, returning 10% for the same period; the next-best strategy was financial equities, returning 3.5%.