Positive December for Equities and Hedge Funds Predicted

Hedgeco Archives - Hedge funds and equity markets are likely to continue their momentum heading into the end of the year and lead to additional gains for investors during the month of December, hedge fund advisor Hennessee Group LLC, believes.

Charles Gradante, Co-Founder of the Hennessee Group, stated “We believe the ‘December Effect, whereby investors choose to defer paying taxes on equity market gains until the following year, will provide additional support to the equity markets as we close out the year. And historical data seems to support this thesis as the equity markets have experienced gains during the final month of the year 70% of the time when positive through the month of November.”

Gradante added, “In addition, hedge funds have experienced gains in December 100% of the time during these same calendar year periods.”

Hennessee Group recently conducted a brief study examining the historical performance of the equity markets and hedge funds when entering the final month of the year with positive year-to-date gains. Hennessee Group focused on the calendar year periods dating back to 1995; using the S&P 500 Index and the Hennessee Hedge Fund Index as proxies.

Dating back to 1995, the S&P 500 Index has generated positive returns through November in ten calendar year periods and experienced additional gains in December 70% of the time. In comparison, hedge funds managed to generate gains in nine of the calendar year periods the S&P 500 Index was positive through November and experienced gains in December 100% of the time.

Gradante stated, “The data supports the ‘December Effect Theory’ and bodes well for investors as we close out 2009. Hennessee Research indicates that when the equity markets were positive through November, they gained on average +2.1% in December while hedge funds gained +1.9%.”

While the Hennessee Group is optimistic for both the equity markets and hedge funds heading into the final month of the year due to the “December Effect”, we are more optimistic that hedge funds are well positioned for a good year on a relative basis in 2010.

In addition, the equity markets are likely to trade in a range as opposed to trend in one particular direction in 2010. The Hennessee Group believes such an environment should favor hedge funds relative to their traditional counterparts as they will have the opportunity to generate alpha on the both the long and short side of their portfolios while not having to rely on market direction or beta for returns.

Hedge funds set to leave London for lower taxes

HedgeCo Archives - Some hedge funds are considering a move to Switzerland or Asia as the European Union doles out new taxes and regulations. The hedge fund industry is worth over $377 billion in Europe, the Associated Press reports.

"There was bound to be a reaction of some sort, when these kind of changes are made," Andrew Schneider, co-founder of HedgeCo, said, "The industry as a whole has bounced back in dramatic fashion. If the EU commission wants to set up a watchdog system for hedge funds, investors and markets, there is sure to be an opening for competition from emerging markets and countries with lower taxes."

When HSBC disclosed that it was reviewing the placement of its headquarters, it fuelled fears of an exodus of leading companies. Three FTSE250 firms disclosed in October that they were leaving London. Among key tax concerns include government proposals to begin taxing "non-domiciled" foreign staff.

European Union lawmakers have also said that hedge fund managers in the UK may be subject to the same kind of restrictions and bonuses currently being imposed on regular banks to limit rewards for short-term success.