Opalesque Industry Update - Hedge Fund Research's May performance notes find that equity markets posted gains for the month despite paring gains in a late-month sell off as government bond yields rose on improving US economic data and expectations for a reduction of bond purchase stimulus measures by the Federal Reserve. US equities led gains for May, with positive contributions across all market capitalizations with sector leadership from Technology, Financials, Cyclicals and Healthcare. |
European equities also posted strong gains, led by Germany, with contributions from the Netherlands, Italy, France and the UK. Asian equities were mixed as the Nikkei experienced a sharp intra-month reversal, ending the month with a narrow decline; China, India and Korea also gained while Australia and Hong Kong declined. Emerging Markets equities declined, with weakness concentrated in both Russian and Latin America. Bond yields rose with US 10 year bond yields rising nearly 50 bps for the month, yields also rose across UK Gilts, France, German Bunds, Italy, Spain, Switzerland and Japan, while Greek bond yields fell sharply on improved fiscal outlook and austerity measures; investment grade credit widened while volatility rose for the month.
The US dollar posted strong gains across most currencies, eclipsing a 4 year high of 100 against the Japanese Yen; the Dollar also gained against the British Pound, Euro, Swiss Franc, Australian Dollar and South African Rand. Declines continued across most commodities led by Gold, Silver, Oil, Natural Gas, Lumber, Cotton and Sugar. Hedge funds posted gains for the 7th consecutive month and 10th in the last 11 months, with the HFRX Global Hedge Fund Index gaining +0.75% and the HFRX Equal Weighted Strategies Index posting a gain of +0.98% for May; Equity Hedge completed 12 consecutive months of gains for the first time since inception of the index.
HFRX Event Driven Index posted a gain of +2.16% for May, the 7th consecutive month of gains, with contributions from Activist, Special Situations & Distressed exposures. The HFRX Special Situations Index gained +1.77% with contributions from transactions in the Energy/Basic Materials, Financial and Cyclical sectors, as well as JC Penny, Sony, Yahoo, Berkshire & Smithfield Foods, while the HFRX Distressed Index posted a gain of +1.58%. HFRX Merger Arbitrage Index posted a gain of +0.37%, with contributions from transactions in ASML/Cymer, GE/Lufkin, KKR/Gardner Denver, Liberty Global/Virgin Media, Berkshire/Heinz and Markel/Alterra.
HFRX Equity Hedge Index posted a gain of +0.83% for May, posting its 12th consecutive month of gains for the 1st time since Index inception, with contributions concentrated in Fundamental Value strategies. The HFRX Fundamental Value Index gained +2.09%, also its 12th consecutive month of gains, with contributions from large cap exposure to the European , US Financial and Consumer equities. The HFRX Market Neutral Index posted a gain of +0.21% from contributions from fundamental strategies, while the HFRX Fundamental Growth Index declined -1.41% as Emerging Markets and short exposure hedging detracted from gains.
The HFRX Relative Value Arbitrage Index posted a gain of +0.73% for 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 +2.78% with gains concentrated in directional exposure to US and Japanese convertibles, volatility gains, gamma trading and effective rate hedging. The HFRX RV: Multi-Strategy Index posted a gain of +0.58%, with contributions from Commodity strategies and US & European credit exposures, while HFRX Fixed Income Credit Index gained +1.10% as tactical high yield credit exposure and rate hedging offset rising bond yields and widening investment grade credit.
HFRX Macro Index posted a decline of -0.95%, with declines from quantitative Systematic CTA strategies, tactical Fixed Income and Currency strategies only partially offset by Multi-Strategy managers. The HFRX Emerging Markets Index posted a modest decline of -0.14% with mixed contributions from Emerging Asian and Latin American exposures. The HFRX Macro: Systematic Diversified Index posted a decline of -0.80% from losses in Fixed Income and Commodities strategies.