The Hennessee Hedge Fund index's 8.3% return for the year ended Dec. 31 trailed the S&P 500 by 2.6 percentage points, according to a news release from the Hennessee Group. Hennessee analysts said underperformance was due to conservative net market exposure caused by uncertainty over the war in Iraq and the U.S. presidential election, low equity market volatility, low interest rates, and high correlation and low dispersion of stock returns. The Hennessee Long/Short index was up 8.4% for the year and the Arbitrage/Event Driven index was up 8%.
In 2005, Hennessee analysts expect long/short equity strategies to return between 8% and 10%; convertible arbitrage to return between 5% and 6%; and merger arbitrage to return about 8%.
