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HFRI Fund Weighted Composite Index fell -1.28% in May (+1.92% YTD)

Wednesday, June 08, 2011
Opalesque Industry Update - Global commodity and equity markets suffered negative losses in May, effectively reversing the gains posted in previous months. The US dollar strengthened against most major currencies, while US yields fell and the yield curve steepened. M&A activity proceeded despite credit spread widening, and most commodities across Agricultural, Energy and Metals posted losses. Hedge funds posted a loss in May, with the HFRI Fund Weighted Composite Index declining -1.28%, the first decline in 9 months and the largest since May 2010, with losses across Macro and commodity exposure only partially offset by gains in Relative Value Arbitrage.

The HFRI Relative Value (Total) Index posted a gain of +0.27% for the month, the 12th consecutive month of gains for RVA and the lone strategy area of positive performance for May. Positive contributions across sub-strategies include fixed-income asset-back, corporate exposure and volatility funds, with these only partially offset by losses in multi-strategy credit funds and fixed-income sovereign strategies. Fixed income focused strategies generally benefitted from falling yields and low net exposure, which was offset by widening credit. The HFRI Fixed-Income Asset Backed Index gained +1.06%, while the HFRI RVA: Multi-Strategy Index declined -0.30% for May.

The HFRI Macro (Total) Index posted a decline of -2.54% for May, reversing its positive performance from the previous month. Macro strategies were impacted by sharp declines in commodity and equity markets, and continued weakness and concerns in Euro-sovereign fixed income markets; systematic trend following strategies posted a decline with the HFRI Macro: Systematic Diversified Index declining -3.65% for May, reversing gains of +4.00% from the prior month. Macro discretionary, currency and commodity exposure and active trading strategies all posted losses.

The HFRI Event Driven (Total) Index posted a decline of -0.47% for the month, the first decline since August 2010 with negative contributions across most ED sub-strategies only partially offset by gains in Activist funds. Event Driven strategies were impacted by weak equity markets and a widening credit and deal spreads associated with increasing risk aversion. The HFRI Merger Arbitrage Index declined -0.14% for May, while the HFRI: Distressed Index declined by -0.28%. Equity special situations and multi-strategy exposure also contributed to the decline.

The HFRI Equity Hedge (Total) Index posted a decline of -1.08% for the month, with modest gains concentrated in Technology, Multi-strategy and dedicated Short-Bias exposure offset by declines in Energy and Growth-oriented exposures. The HFRI EH: Energy/Basic Materials Index posting a loss of -3.18%, while the HFRI EH: Technology/Healthcare Index gained +0.71%. Factor-based and behavioral equity market neutral strategies posted a narrow decline of -0.18%, while Fundamental Growth and Fundamental Value strategies declined by -1.73% and -1.00%, respectively.

The HFRI Fund of Hedge Funds Index posted a decline of -1.46%, while the HFRI Emerging Markets Index posted a decline of -1.97% for the month, with the negative contributions across all Emerging Markets, concentrated in Emerging Asia, Russia and Eastern Europe...Full performance table: Source

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