market folly

Hennessee Group LLC has released its November performance data for its Hedge Fund Index: it advanced +0.36% in November (+5.47% year to date).  Below is some select commentary on what they're seeing from various funds and how they're positioned:


Stockpicking Environment Improved

Hennessee Group's Managing Principal Charles Gradante said that hedge funds gained during the month mainly due to alpha from stock selection (as well as managing exposure levels). 

He went on to say that, "As correlation among securities has declined, the environment for stock selection has improved.  That said, managers remained concerned about continuing fiscal and political uncertainty and have reduced net exposure levels."

Managing Principal Lee Hennessee also highlighted that many fund managers are "somewhat optimistic about 2013 due to an accommodative Fed, an increase in bank lending, a continued housing recovery supported by record low mortgage rates, and lower gasoline prices, which should help the consumer."  


Hedgies Like Mortgages

Gradante also noted how many managers that initially were short subprime in 2007/08 have reversed course, building long positions via structured products earlier this year.

He pointed out that, "This has been a significant profit generator in 2012 and a lot of the easy money has been made.  While we have seen some profit taking in recent months, managers believe that this will continue to be a profitable trade as we continue to see mortgage quality improving."

Kyle Bass of Hayman Capital recently shared that 90% of what he owns is in bonds via a ton of RMBS/subprime exposure.