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Hedge funds post third successive month of gains in May

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Hedge funds marked another positive performance month in May, with the industry returning 0.93 per cent through the month to bring year-to-date gains to 1.55 per cent, according to data released by Preqin.

Although this does not match the 2.39 per cent and 1.42 per cent returns seen in March and April, almost all leading strategies saw positive returns; and for the first time this year, all leading strategies are now marking positive year-to-date performance. Event driven strategies saw the strongest performance through the month, returning 1.59 per cent to take 2016 YTD returns to 3.01 per cent – the highest of any leading strategy – while equity strategies also posted robust gains of 1.18 per cent for the month. Macro strategies were the only leading strategy to record losses in May, returning -0.11 per cent. 

Following three months in which they produced the highest returns of any size classification*, emerging hedge funds saw the lowest returns of any size in May, with gains of 0.65 per cent. By contrast, large hedge funds had their highest performance month of 2016, making gains of 1.19 per cent. However, this does not reverse the overall trend seen in the preceding months, and emerging hedge funds still have the highest YTD returns (+1.80 per cent), while large hedge funds are the only size classification still facing losses, with returns of -0.16 per cent for the year so far. 

Discretionary funds posted gains of 1.29 per cent in May, outperforming systematic funds (+0.53 per cent) for a third consecutive month. Both trading styles are seeing gains through 2016 YTD, with discretionary funds returning 1.17 per cent and systematic performance at 1.02 per cent.
Alternative mutual funds saw a month of near-neutral returns, posting 0.08 per cent through May and 0.58 per cent so far this year. UCITS also saw small gains of 0.21 per cent, with the fund type still returning negative performance of -1.35 per cent for 2016 YTD.
The fluctuating performance of CTAs took a downward turn in May, suffering losses of 0.98 per cent. Although 2016 YTD shows gains of 0.68 per cent, CTAs have only recorded two consecutive months of positive returns once since the start of 2015.
Hedge funds focused on North America saw the largest gains in May, returning 1.38 per cent, with the region also seeing the best performance through 2016 YTD (+2.40 per cent). Although they recorded positive performance for the month, Asia-Pacific- and Europe-focused funds are still showing losses of 0.81 per cent and 1.68 per cent respectively for the year so far. 

“The hedge fund industry saw further gains in May, with positive returns across all leading strategies and for the industry as a whole. Most trading methodologies and strategies are showing gains in 2016 YTD, despite negative performance at the start of the year, and hedge funds can look forward to the coming months with optimism. 
Although macro-events such as the Brexit referendum and US election are making for choppy global markets, the industry has begun to show again its ability to provide non-correlated, risk-adjusted returns in challenging financial conditions,” says Amy Bensted (pictured), Head of hedge Fund products at Preqin. “Continued positive performance to the end of H1 should restore some investor confidence in the industry, and fund managers will be hopeful of increasing inflows over the remainder of 2016.” 

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