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European equities were led by gains in Germany, the UK, Spain and the Netherlands, with these only partially offset by declines in Italy; Asian equity gains were again led by India, with China and the Philippines also posting gains. Government bond yields were little changed through mid-May, with US & European issues posting small declines while corporate credit spreads tightened. The US dollar posted a sharp gain against the Euro complemented by narrow gains against the British Pound and Japanese Yen, the Dollar fell against Emerging Market currencies including the Brazilian Real, South African Rand, Chilean Peso and the Russian Ruble. Commodity gains were led by Copper, Oil & Sugar, with these offset by declines in Natural Gas, Coffee and Cattle. Hedge funds posted a narrow gain through mid-month, with the HFRX Global Hedge Fund Index gaining +0.04%.

HFRX Relative Value Arbitrage Index posted a gain of +0.51% through mid-May, with contributions from Multi-Strategy managers and mixed performance from Convertible Arbitrage strategies. The HFRX Multi-Strategy Index posted a gain of +0.66% with contributions from Global Credit, Equity and Commodity strategies, while HFRX Convertible Arbitrage Index declined -0.2% as credit gains were offset by declines in volatility positions and exposure to Asian convertibles. HFRX Fixed Income Credit Index gained +0.40% with contributions for Global Rates and Corporate Credit strategies, while HFRX MLP Index gained +1.14% through mid-month on continued demand for yield generating energy infrastructure partnerships.

HFRX Macro Index posted a gain of +0.16% through mid-May, with contributions from Global Rates and Emerging Markets strategies partially offset by mixed performance in systematic managers. Macro Discretionary strategies posted gains with contributions from fixed income, currency and emerging markets exposures. HFRX Macro: Systematic Diversified Index declined -0.21% through mid-May with negative contributions from short term trending models only partially offset by long term models.

HFRX Event Driven Index posted a narrow gain of +0.07% through mid-May, with positive contributions from Distressed/Restructuring strategies partially offset by declines in Equity Special Situations and Merger Arbitrage managers. HFRX Distressed Index gained +0.53% from restructurings across Consumer and Communications sectors in the US. HFRX Merger Arbitrage Index posted a narrow decline of -0.07%, with contributions from transactions in Hillshire/Pinnacle Foods, Pfizer/AstraZeneca, Suntory/Beam, Actavis/Forest Labs and Tower Financial/Old National Bancorp. HFRX Special Situations Index posted a modest decline -0.08%, with contributions from core positioning in American Realty, Hertz, Lamar, McKesson, Penn West Petroleum, Sensient Technologies, Vivendi and Athabasca Oil.

HFRX Equity Hedge Index posted a decline of -0.51% through mid-May, with mixed performance in Fundamental and Market Neutral managers and negative contributions from small cap exposures. HFRX Fundamental Value Index declined -0.21% with declines concentrated in positioning in Technology and Communications equities only partially offset by European, Consumer and Japanese exposure. HFRX Fundamental Growth Index posted a decline of -1.15% with contributions from exposure to small-cap equities. HFRX Market Neutral Index declined -1.07%, with mixed contributions across factor-based models and fundamental and trading oriented strategies.