Hedge fund strategies’ performance retreated in May as both equity and bond markets struggled amid the European debt crisis and its effect on the global recovery.
The Lipper Hedge Fund Composite Index posted a loss of 2.97 per cent, with all sub-strategies except dedicated short bias (+1.0 per cent) finishing in the red for the month.
Long bias (-4.65 per cent) was the worst performing strategy, bettered somewhat by multi-strategies (-4.07 per cent).
Many trend-following managers experienced a bad month because of a trend reversal in commodities and on cross-market correlation infecting a number of asset classes.
Long bias and long/short equity (-3.70 per cent) experienced a difficult month in May as both developed and emerging equity markets posted their worst monthly returns since February 2009.
May was a difficult month for managed futures (-3.44 per cent). Trend-following managers had a dreadful month as a number of market trends reversed sharply and market correlations increased at the same time global market returns decreased.
Event driven (-1.91 per cent) also posted a loss for May. Distressed securities funds in particular had a bad month as high-yield bond markets registered negative returns, with spreads widening.