Hedge funds posted a loss in May, with the HFRI Fund Weighted Composite Index declining 1.28%, the first decline in 9 months and the largest since May 2010, with losses across Macro and commodity exposure only partially offset by gains in Relative Value Arbitrage.
The HFRI Relative Value (Total) Index posted a gain of 0.27% for the month, the 12th consecutive month of gains for RVA and the lone strategy area of positive performance for May. Positive contributions across sub-strategies include fixed-income asset-back, corporate exposure and volatility funds, with these only partially offset by losses in multi-strategy credit funds and fixed-income sovereign strategies. Fixed income focused strategies generally benefitted from falling yields and low net exposure, which was offset by widening credit. The HFRI Fixed-Income Asset Backed Index gained 1.06%, while the HFRI RVA: Multi-Strategy Index declined 0.30% for May.
The HFRI Macro (Total) Index posted a decline of 2.54% for May, reversing its positive performance from the previous month. Macro strategies were impacted by sharp declines in commodity and equity markets, and continued weakness and concerns in Euro-sovereign fixed income markets; systematic trend following strategies posted a decline with the HFRI Macro: Systematic Diversified Index declining 3.65% for May, reversing gains of +4.00% from the prior month. Macro discretionary, currency and commodity exposure and active trading strategies all posted losses.
The HFRI Event Driven (Total) Index posted a decline of 0.47% for the month, the first decline since August 2010 with negative contributions across most ED sub-strategies only partially offset by gains in Activist funds. Event Driven strategies were impacted by weak equity markets and a widening credit and deal spreads associated with increasing risk aversion. The HFRI Merger Arbitrage Index declined 0.14% for May, while the HFRI: Distressed Index declined by 0.28%. Equity special situations and multi-strategy exposure also contributed to the decline.
The HFRI Equity Hedge (Total) Index posted a decline of 1.08% for the month, with modest gains concentrated in Technology, Multi-strategy and dedicated Short-Bias exposure offset by declines in Energy and Growth-oriented exposures. The HFRI EH: Energy/Basic Materials Index posting a loss of 3.18%, while the HFRI EH: Technology/Healthcare Index gained 0.71%. Factor-based and behavioral equity market neutral strategies posted a narrow decline of 0.18%, while Fundamental Growth and Fundamental Value strategies declined by 1.73% and 1.00%, respectively.
The HFRI Fund of Hedge Funds Index posted a decline of 1.46%, while the HFRI Emerging Markets Index posted a decline of 1.97% for the month, with the negative contributions across all Emerging Markets, concentrated in Emerging Asia, Russia and Eastern Europe.
