The Markets December 9, 2006

Emerging, Developed Markets Stayed Positive in November

Returns from the world’s emerging and developed markets stayed in the black in November as oil prices remained significantly below their summer highs, Standard&Poor’s said Tuesday.
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A Standard & Poor’s news release said its global stock market review, The World By Numbers, found that emerging markets gained 7.96% in November, while developed markets rose 2.75% for the month.Developed market returns continued to trail emerging markets for both the quarter and the latest one-year period, S&P found.

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In November, 26 of the 27 developed markets posted gains with an average advance of 4.65%, S&P said.Iceland was the sole decliner, falling 4.49%.Meanwhile, the emerging markets had mixed results, with 19 markets up, averaging an 8.03% gain, and seven markets declining, with an average loss of 4.53%.

For the month, impressive returns were posted by Russia (10.58% from 1.91% in October), China (11.53% from 6.64%), and Taiwan (10.81% from 1.33%).Jordan, however, had posted a slight gain of 1.34% last month but reverted back in November to show a 7.95% loss, resulting in a 12-month giveback of 41.75%.

All 10 sectors showed gains, with Energy as the best performer in November, gaining 6.29%.Health Care managed a slim 0.45% gain, with much of the pressure coming from theUS; Ex-U.S. Health Care was up 1.23%, the S&P news release said.

“Oil prices rebounded from its October close of $58.73 to close at $63.16.Speculation on how consumers might use this “extra’ money ranges from increased holiday spending to viewing the low price as a short-term event due to the volatility of oil prices and not spending,” said Howard Silverblatt, senior index analyst at Standard & Poor’s, in the news release.“Also influencing markets were currency concerns over the weakness of the dollar. The Euro moved up closer to its historical high of 1.36 vs. the US dollar, and the Pound neared the $2.00US mark for the first time in 14 years.”

The full S&P/Citigroup World by Numbers Report for November is at www.standardandpoors.com.

The Markets December 9, 2006

Hedge Fund Industry Grew 21% in 2006

A new survey of the US hedge fund industry found it has grown 21% to $1.22 trillion this year.
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A news release from the Hennessee Hedge Fund Advisory Group about its 12th Annual Hennessee Hedge Fund Manager Survey found that asset growth over the year was the result of positive manager performance (+11%) and new capital inflows (+10%). The number of hedge funds grew 10% to 8,900 funds.

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“Despite some high profile disappointments, the hedge fund industry continued to see positive inflows, confirming its maturity as an asset class,” said E. Lee Hennessee, managing principal of Hennessee Group LLC, in the news release.

Individuals and family offices (including funds’ general partners and employees) continue to represent the largest source of capital for hedge funds, comprising 40% of total industry assets, Hennessee found. After that:

  • fund-of- funds represent 28%,

  • corporations represent 18%,

  • pensions represent 11%, and

  • endowments and foundations represent 8%.

Meanwhile, hedge funds surveyed had an average long exposure of 106% and short exposure of -55%, indicating a low use of margin. The funds had an average gross exposure (longs plus shorts) of 161%, while net exposure (longs minus shorts) was +51%.

Some 86% of hedge funds are registered with a regulatory agency, up from 61% the previous year, the survey found.

The 2006 survey respondents include 440 hedge funds from 97 management companies representing over $256 billion in assets.For details or questions regarding the survey, call (212) 857-4400.

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