Hedge funds posted gains for the fourth consecutive month in May, bringing year to date (YTD) gains for the HFRI Fund Weighted Composite (FWC) Index to 3.9%, outperforming both the S&P 500 and the Dow Jones indices.
A report by HFR, a global hedge fund information provider, says that the gains were led by equity hedge strategies, with the technology, healthcare and fundamental values sectors performing particularly well.
While the FWC Index advanced 0.7% in May, the main thrust of hedge funs strategy performance was led by the HFRI Equity Hedge Index, which added 1.3% last month bringing YTD performance to 5.1%, leading all hedge fund strategies.
Event driven strategies also performed well last month due to a surge in merger and acquisition activity. The HFRI Event Driven Index rose by 0.6% for May and YTD performance up to 3.9%. Event driven sub-strategies such as special situation and activist funds have also performed well
, gaining 5.2% and 5% respectively in May alone.
Bond market volatility has helped fixed income-based relative value arbitrage (RVA) strategy funds to perform well due to yield increases in the US and Europe. Volatility is in fact the leading driver of RVA sub-strategy performance, as YTD through May, the index has gained 6%.
Macro sub-strategy performance was led by currency exposures, with the HFRI Currency Index gaining 3.5% in May. However, the HFRI Emerging Markets Index posted a narrow decline of -0.06% for last month, although emerging markets leads regional exposures YTD with a gain of 6.5%
“As rates have begun to rise, a continuum of macroeconomic scenarios represents opportunities for funds which are able to generate performance through tactical execution and positioning,” says Kenneth Heinz, president of HFR.
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