Global trade disputes and oil price downturns took a toll on hedge funds in May, bringing an end to the industry’s four-month run of positive returns. For the month, the hedge fund industry was down 1.47 per cent, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions.
By comparison, the S&P 500 Total Return Index was down 6.35 per cent for the month. Year-to-date through the end of May, hedge funds returned 5.23 per cent, while the S&P was up 10.59 per cent on the year.
“Hopeful signs from US-China trade talks vanished in the face of heightened tariffs and proved to be a drag on equity markets in May,” says Sol Waksman, president of BarclayHedge. “The trade war and the accompanying decrease in oil prices further weighed down hedge fund returns.”
While the overall industry was down in May, there were gainers among hedge fund sectors. Leading the way was the Option Strategies Index, up 1.93 per cent for the month, followed by the Emerging Markets Eastern Europe Index and the Emerging Markets Eastern European Equities Index, both up 1.01 per cent in May.
“Eastern Europe remains a strong economic story,” says Waksman. “Economic expansion appears to be continuing in Poland, while first quarter growth in Romania exceeded projections and Hungary’s first quarter growth was the strongest in almost 20 years.”
Among the other sectors posting positive numbers in May were the Emerging Markets Global Fixed Income Index, up 0.74 per cent, and the European Equities Index, with a 0.46 per cent return for the month.
Far more sectors were in the red for May than in the black. The Technology Index was down 4.40 per cent for the month, the Emerging Markets Global Equities Index, down 4.28 per cent, the Emerging Markets Asian Equities Index, down 4.18 per cent in May, and the Equity Long Bias Index dropped 3.47 per cent.
Strong Eastern European economic performance showed up again in year-to-date returns. Through the end of May, the Emerging Markets Eastern European Equities Index was up 12.06 per cent while the Emerging Markets Eastern Europe Index gained 11.17 per cent. Other notable year-to-date gainers included the Healthcare & Biotechnology Index, up 11.90 per cent on the year, the Emerging Markets Global Fixed Income Index, returning 9.95 per cent year-to-date and the Technology Index, with an 8.15 per cent return through the end of May.
