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HFRX Global declines -1.69% (+1.52% YTD); Macro: CTAs gain +2.81% in volatile month of May

Wednesday, July 04, 2012
Opalesque Industry Update - Global equity markets declined sharply in May as European sovereign debt and bank liquidity concerns resulted in a sharp increase in investor risk aversion; mixed economic data in US and disappointing results of large technology IPO also contributed to investor concerns. Equities in Energy, Technology, Financials and Emerging Markets all posted sharp declines for May. Treasury yields in safe haven countries fell to historical lows with gains in longer dated issues contributing to significant curve flattening.

Investors flocked to US dollar & Swiss Franc, driving these to strong gains against the Euro. Commodities also posted declines on a weakening global economic outlook, with Oil and Copper posting large declines. Hedge funds posted declines for the month with Macro strategy gains partially offsetting Equity strategy declines; the HFRX Global Hedge Fund Index posted a decline of -1.69% while the HFRX Absolute Return Index posted a narrow decline of -0.24%.

The HFRX Macro CTA Index gained +0.36% in May with strong positive contributions from systematic diversified funds, partially offset by mixed performance across discretionary and commodity strategies. The HFRX Macro Systematic Diversified CTA Index led all hedge fund strategies in May, posting a gain of +2.81%, the strongest performance since July 2011. Constituent managers posted gains as a result of currency positions, including Long US$/Euro, and significant positions in government fixed income. Discretionary & Commodity focused managers posted mixed performance across the various asset classes in a volatile month.

The HFRX Equity Hedge Index posted a decline of -3.07%, its largest decline in since September 2011, as global equity markets posted steep declines. The HFRX Equity Market Neutral Index posted a decline of -0.44% for the month, with gains across trading and factor-based strategies offset by weakness in behavioral strategies. Fundamental Growth and Fundamental Value declined -3.60% and -1.92%, respectively, with Technology, Energy & Financials all contributing to declines.

The HFRX Relative Value Arbitrage Index posted a decline of -1.65%, the first monthly decline in 6 months, with credit & equity losses only partially offset by falling yields and increased volatility. The HFRX Convertible Arbitrage Index posted a decline of -0.65% for the month, the 1st monthly decline for 2012, with credit losses offsetting gains from short equity, volatility and falling yields. The HFRX RV Multi-Strategy Index declined -1.58%, with weakness across Fixed Income Arbitrage & Energy Infrastructure exposures only partially offset by mixed performance across Emerging Markets exposures.

The HFRX Event Driven Index posted a decline of -2.01% for the month, with May weakness only narrowing the YTD gain to +3.6%. The HFRX Merger Arbitrage Index posted a decline of -0.21% for the month, with positions in Johnson & Johnson, Motorola Mobility, Viterra & Glencore, Kinder Morgan and El Paso contributing to results. Despite a positive contribution from Credit Arbitrage strategies, equity and distressed strategies posted declines for the month, with HFRX Special Situations Index and the HFRX Distressed Index declining by -2.34% and -1.41%, respectively. Full press release:Source

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