Hedge funds gain 2.71 per cent in May

Stock markets carried April’s momentum into May and hedge funds were among the beneficiaries posting a 2.71 per cent monthly return, 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 up 4.76 per cent in May.

Year-to-date, the hedge fund industry is down 4.67 per cent through May. The S&P 500 Total Return Index is down 4.97 per cent over the same period.

All sectors but two tracked by the Barclay Hedge Fund Indices were in positive territory in May. The exceptions were the Merger Arbitrage Index, down 0.42 per cent, and the Equity Market Neutral Index, losing 0.02 per cent in May.

While bad economic news was present in abundance in May thanks to the Covid-19 pandemic, markets were encouraged by governments’ and central banks’ economic stimulus actions, the first stages of easing of pandemic-related shutdowns and hopeful signs in the effort to develop a vaccine for the novel coronavirus.

“Equity markets continued to seize on optimistic news as they rebounded from their initial pandemic downturn, while oil prices responded positively to the combination of production limits and renewed business activity,” says Sol Waksman, president of BarclayHedge. “The result was another positive month for hedge funds.”

With the world in the throes of a global health crisis, it’s not surprising the Healthcare & Biotechnology Index set the pace among hedge fund sectors in May with a 5.74 per cent return. Other leading gainers in May included the Technology Index, up 4.81 per cent, the Pacific Rim Equities Index, gaining 4.62 per cent, the Equity Long Bias Index, returning 4.14 per cent, and the Event Driven Index, up 4.12 per cent.

Most hedge fund sectors remained in the red year-to-date through May, though six sectors bucked the trend. Leading the year-to-date gainers was the Volatility Trading Index, up 10.42 per cent, followed by the Technology Index, gaining 5.27 per cent, the Fixed Income Arbitrage Index, returning 4.80 per cent, and the Healthcare & Biotechnology Index, up 3.53 per cent. Also posting year-to-date gains were the Option Strategies Index, gaining 2.48 per cent, and the Global Macro Index, returning 1.58 per cent.

Among sectors in the red for the year, some of the largest drops were in the emerging markets. The Emerging Markets Latin America Index was down 22.44 per cent, the Emerging Markets Global Equities Index was off 14.83 per cent, the Emerging Markets MENA Index lost 12.92 per cent, the Emerging Markets Eastern European Equities Index was down 11.63 per cent and the Emerging Markets Global Index was off 11.16 per cent.