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HFRX Event Driven Index posted a gain of +1.81% through mid-May, the 7th consecutive month of gains, with contributions from Equity Special Situations, Merger Arbitrage and Distressed strategies. The HFRX Special Situations Index gained +1.63% with contributions from transactions in the Energy/Basic Materials, Financial and Cyclical sectors, as well as JC Penny, Sony, Yahoo, Apple & Herbalife, while the HFRX Distressed Index posted a gain of +1.16%. HFRX Merger Arbitrage Index posted a gain of +0.14%, with contributions from transactions in FirstMerit/Citizens Republic Bancorp, KKR/Gardner Denver, Liberty Global/Virgin Media, Berkshire/Heinz and Markel/Alterra.

HFRX Equity Hedge Index posted a gain of +1.66% through mid-May, the 12th consecutive month of gains, with contributions from Fundamental equity long short strategies. The HFRX Fundamental Value Index gained +2.51% from large cap exposure to the US Financial, Consumer and European equities. The HFRX Fundamental Growth Index gained +0.54% from exposure to Japanese, Emerging Asian and Latin American equity, Communications, Financial and Consumer sectors. The HFRX Market Neutral Index posted a decline of -0.74% from contributions from factor based, trading and behavioral strategies.

HFRX Relative Value Arbitrage Index posted a gain of +0.99% through mid-May, also the 7th consecutive month of gains, with contributions from Convertible, Multi-Strategy and Corporate Fixed Income strategies. The HFRX RV: Convertible Arbitrage Index gained +2.51% with gains concentrated in directional exposure to US and Japanese convertibles, credit gains, gamma trading and effective rate hedging. The HFRX RV: Multi-Strategy Index posted a gain of +0.80%, with contributions from US & Asian credit exposures and Commodity Arbitrage strategies, while HFRX Fixed Income Credit Index gained +1.42% as global credit continued to tighten and hedging offset rising bond yields.

HFRX Macro Index posted a narrow gain of +0.02%, with contributions from tactical sovereign Fixed Income, Multi-Strategy and Currency strategies only partially offset by quantitative Systematic CTA strategies. The HFRX Emerging Markets Index posted a gain of +1.42% with contributions from Asian and Latin American exposures. The HFRX Macro: Systematic Diversified Index posted a decline of -0.42% as Metals extended declines from April, while the US Dollar posted strong gains.

Global financial markets extended 2013 gains through mid-May, as the Japanese Yen broke 100 $/¥ for the first time since May 2009 and US equities posted record closes in 9 out of 11 trading days through May 15th. Broad-based US equity gains were strong across both growth and value as well as small and large caps, with sector leadership from Technology, Cyclicals and Financials. European equities also posted strong gains as Greek sovereign debt surged; equity gains were led by Germany, Switzerland, Italy & the Netherlands and Greek equities hit highest level since August 2011. Japanese stocks gained nearly 9% through mid-May leading Asian gains and bringing the YTD gain for the Nikkei to over 45%; India, China & the Philippines also posted strong gains. Government bond yields rose across most developed markets, with yields on US Treasuries, German Bunds and UK Gilts all rising; yields increased across Italy, Spain & France as well. Greek bond yields fell to the lowest level in over 3 years on credit rating upgrade, with yields approaching 8%. M&A continued at a brisk pace with transactions in GE/Lufkin Industries, AETNA/Coventry Health Care and Solvay/INEOS, while high yield credit tightened to yield below 5%. Gold & Silver extended April declines, posting additional losses through mid-May; cattle, lumber, sugar and corn also posted declines. The US$ posted strong gains across the board on expectations for curtailment of stimulus efforts; the Dollar breached a 4 year high against the Japanese Yen, but also rising against the British Pound Sterling, Euro, Swiss Franc and Australian Dollar.

Comments reference performance as published through May 15, 2013.

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