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Mirroring trends across financial markets, hedge fund performance during May was widely divergent across strategies, with Macro funds posting their best monthly performance since April 2011, while Equity Hedge posted its largest decline since September 2011. The HFRI Macro Index gained +1.7 percent in May, bringing YTD gains to +1.9 percent, with significant contributions from Systematic strategies and positions in fixed income, commodities and currencies, with limited aggregate exposure to equity market volatility. The HFRI Macro: Systematic Diversified Index gained +4.1 percent in May and has gained +2.9 percent YTD.

The HFRI Equity Hedge Index posted a decline of -4.1 percent in the month, paring its YTD gain to +1.8 percent, with declines across Growth, Energy and Emerging Markets strategies only partially offset by Short Bias funds, which gained over +7.0 percent.

Event Driven strategies declined by -1.4 percent, paring YTD gains to +3.1 percent, with weakness in Activist, Distressed and Equity Special Situations funds. Falling yields and increased volatility failed to offset the impact of credit weakness as Relative Value Arbitrage funds posted a decline of -1.3 percent, the first decline for this strategy in 2012, narrowing YTD gains to +3.1 percent.

Funds of Hedge Funds posted a decline of -2.0 percent, while Emerging Markets hedge funds declined by -5.4 percent, the largest decline for EM hedge funds since September 2011. With the May decline, HFRI Emerging Markets Index has gained +0.8 percent YTD.

“During the volatile month of May, investors reacted to increased European bank and sovereign bond risk and weakening U.S. economic data by aggressively moving portfolios toward less risky exposures,” said Kenneth J. Heinz, president of HFR. “This risk-off response adversely impacted certain areas of equity-sensitive hedge fund exposures, while benefitting strategies tactically positioned to insulate portfolios and produce gains resulting from the strong trends and volatile environment which materialized. In the current environment, at some level, every hedge fund is a Macro fund.”

HFR

Press Release

BM