Hedge Funds Down For 2002 but Significantly Outperform Major Indices - 01/09/03

January 9, 2003 - New York, NY -- The Hennessee Hedge Fund Advisory Group ("Hennessee Group LLC"), a global hedge fund investment consulting firm, which advises individuals and institutions on over $1 billion in assets, today announced that hedge funds produced a negative return of -0.58% in December, according to the Hennessee Hedge Fund Index®. Though hedge funds were down for the month, their performance surpassed the broad markets as the S&P 500 Index lost -5.90%, the Dow Jones Industrial Average fell -6.23% and the Nasdaq Index decreased   -9.69%. For 2002, hedge funds were down
-3.43%, the first negative year since the Hennessee Group began monitoring hedge funds in 1987. Nonetheless, hedge funds still handily outperformed the broad US equity markets as the S&P 500 fell -22.19%, the Dow Jones Industrial Average dropped -16.76%, and the Nasdaq was down -31.52%. In addition, Lipper Mutual Funds were down -18.77% in 2002.

"With market volatility extremely high and the broad markets suffering 5%+ losses, hedge funds proved their value added once again by posting a slight loss for December," said Charles Gradante, Managing Principal of Hennessee Group LLC. "This downside risk management is further evidenced by the
yearly figures for 2002. The average hedge fund beat the broader indices by 20%," added Mr. Gradante.

December continued to cause problems for hedge fund managers as the Volatility Index (VIX) once again averaged above 30 for most of the month while market conviction and sentiment declined. Short Biased hedge fund managers profited as the markets took a negative turn, posting a +3.05% return for December.   Latin America managers posted a third straight
positive month with a +2.90% return for the month, as the Brazilian and Argentine markets rallied   9% and 15% respectively, despite troubles in Venezuela.   The third best performing hedge fund managers for the month were Distressed managers with a +2.77% return as spreads seemed to stabilize and the default rate in high yield debt continued to trend lower.

"The performance of distressed and high yield hedge fund managers is positive for the overall equity and bond markets," stated Mr. Gradante.

"Even so, the Hennessee Group is concerned with hedge funds that are using the credit default swap market for speculation and not for hedging.

According to Hennessee sources, the level of this speculation is at an all time high, increasing performance risk for these managers," Mr. Gradante added.

Several   political and economic factors affected the performance of Long/Short Equity managers in December. Market uncertainty, spurred by the announcement of a 6% unemployment figure and the weakest holiday shopping
season in thirty years, was intensified by the possible increase in energy costs due to the turmoil in Venezuela and the looming prospect of war with Iraq.   As a result Opportunistic managers fell by -3.53% and Growth managers fell by -2.64%. Additionally, after two strong, positive months, Healthcare/Biotech managers fell -2.67% as many high beta biotech names
sold off with the rest of the market.

"In 2003, the best performing hedge fund managers will be those that effectively negotiate a market characterized by low conviction and high volatility," concluded Mr. Gradante.


About the Hennessee Group LLC

The Hennessee Group is a pioneer in hedge fund investments and currently advises on over $1 billion of assets invested in 125 different hedge funds.

All portfolios are customized to fit each client's investment objectives and risk parameters.   At the Hennessee Group, we emphasize investment advice through "hands on" experience and direct client access to our managing principals, who have over 50 combined years of experience. The Hennessee Group does not market individual hedge fund managers nor fund of
funds. The Hennessee Group's only client is the investor.