The Hennessee Hedge Fund Index declined 3.7% in September (-5.2% YTD), while the S&P 500 declined 7.2% (-10.0% YTD), the Dow Jones Industrial Average fell 5.9% (-3.9% YTD), and the NASDAQ Composite Index decreased 6.4% (-9.0% YTD).  

Treasury and high quality bonds rallied amid the volatility, as the Barclays Aggregate Bond Index advanced 0.7% (+6.7% YTD), while the Barclays High Yield Credit Bond Index fell 3.3% (-1.8% YTD).

“September was another challenging month for hedge funds, capping one the of the worst performance quarters in history, largely driven by increased European sovereign debt risks and not declining domestic equity fundamentals.  In response, managers have significantly reduced gross and net exposures in line with increased volatility resulting in abnormally high cash levels and low net exposures,” says Charles Gradante (pictured), Co-Founder of Hennessee Group. “Managers are looking for market transparency and stabilization before getting reinvested.  Consequently, their reactive cash and net exposures present relative ‘whiplash’ performance risk should there be a sharp equity rally in the fourth quarter.”