Hedge funds lost 2.98% in May, according to the Barclay Hedge Fund Index compiled by BarclayHedge. The Index remains up 1.77% in 2012.

“Falling equity prices worldwide weighed heavily on hedge fund performance in May,” says Sol Waksman (pictured), founder and president of BarclayHedge. “Funds trading in companies within the energy and natural resource sectors were hit particularly hard, as fears of slowing growth in China and a recession in Europe put investors back into risk-off mode.

“Equity Long Bias, European Equities, Emerging Markets, and Pacific Rim Equities traders all took losses for the second month in a row,” says Waksman.

In May, 16 of Barclay’s 18 hedge fund indices measured losses for the month. The Emerging Markets Index dropped 5.43%, Equity Long Bias lost 4.93%, Pacific Rim Equities fell 4.78%, European Equities gave up 3.05%, and the Event Driven Index lost 2.65%.

On the positive side, the Barclay Equity Short Bias Index jumped 9.01% in May. Equity Short Bias is still down 8.02% year-to-date.

The Barclay Fund of Funds Index lost 1.61% in May, but is still up 1.14% in 2012.