Hedge funds experienced their best six months during the first half of this year since 1999, according to Hennessee Group, a hedge fund advisory firm. The Hennessee Hedge Fund Index rose 11.74% through June 2009, second only to gains of 14.81% a decade ago.

Hedge funds outperformed the broader market indices, including the S&P 500, which increased nearly 2% during the first six months of the year.

Charles Gradante, co-founder of Hennessee Group, notes that when hedge funds put up record numbers it was during a bull market, unlike the backdrop for gains in the most recent period.

“Hedge fund managers have demonstrated an ability go generate alpha, via strong stock selection on both long and short sides of their portfolios while taking on little directional exposure,” Gradante said.

This year’s gains come on the heels of the worst year for hedge fund performance since at least 1987.

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