Hedge funds posted gains for the fourth consecutive month in May, led by Equity Hedge strategies, with significant contributions from Technology, Healthcare and Fundamental Value exposures, according to the latest data from HFR.
The HFRI Fund Weighted Composite (FWC) Index® advanced +0.7 per cent for the month, bringing YTD gains for the HFRI FWC through May to +3.9 per cent, leading both the S&P 500 and Dow Jones Industrial Average, while the HFRI Fund of Funds Index climbed +1.1 per cent for May and +4.0 per cent YTD.
Hedge fund strategy performance was led by the HFRI Equity Hedge Index, which added +1.3 per cent in May, the fourth consecutive monthly gain, bringing YTD to +5.1 per cent and leading all main hedge fund strategies, as well as the S&P 500 and DJIA. Equity Hedge performance was led by the HFRI Technology/Healthcare Index, which advanced +3.5 per cent for May, leading all hedge fund sub-strategies; the Index has gained +8.5 per cent YTD, also the leading area of sub-strategy performance. The HFRI EH: Fundamental Value Index gained +1.5 per cent, bringing YTD performance for FV to +5.1 per cent. Partially offsetting these gains, the volatile HFRI Energy/Basic Materials Index declined by -1.4 per cent for the month, the seventh decline in the past 9 months.
Event Driven strategies also advanced for the month, as M&A activity continued to surge, with the HFRI Event Driven Index gaining +0.6 per cent, bringing YTD performance to +3.9 per cent. Event Driven sub-strategy performance was led by HFRI ED: Multi-Strat and HFRI Merger Arbitrage Indices, which gained +1.1 and +0.9 per cent, respectively, for the month. Through May, ED sub-strategy performance has been led by Special Situations and Activist strategies, with these gaining +5.2 and +5.0 per cent, respectively.
Fixed income-based Relative Value Arbitrage strategies posted gains in May as US and certain European bond yields increased, with the HFRI Relative Value Arbitrage Index gaining +0.5 per cent for the month. RVA performance was led by HFRI RVA: Volatility Index, which advanced +1.4 per cent in May, while the HFRI RV: Multi-Strategy Index, comprised of creditmulti strategy funds, gained +0.8 per cent. Volatility is the leading area of RVA sub-strategy performance YTD through May, advancing +6.0 per cent.
Macro hedge funds were impacted by directional currency and commodity volatility in May, with the HFRI Macro Index unchanged for the month. Macro performance was led by fundamental strategies, with the HFRI Macro: Discretionary Thematic Index advancing +0.7 per cent, while the HFRI Macro: Multi-Strat Index gained +0.5 per cent. Systematic CTA strategies declined for the month, as the HFRI Macro: Systematic Diversified/CTA Index fell by -0.4 per cent. Through May, Macro sub-strategy performance was led by Currency exposures, with the HFRI Currency Index gaining +3.5 per cent. The HFRI: Emerging Markets Index posted a narrow decline of -0.06 per cent for May, though EM leads regional exposures YTD with a gain of +6.5 per cent.
“May was another exciting month for hedge fund performance, as drivers shifted from the EM-dominated gains in April to a broad base of contributions from developed market equities, specifically Technology and Healthcare, as well as M&A, Discretionary Macro and Fixed Income exposures,” says Kenneth J Heinz, President of HFR. “Hedge fund exposures and performance have effectively adapted to this dynamic and fluid macro environment, leading established benchmarks of equity market performance through May. 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.”
