Hedge funds witnessed the seventh consecutive month of positive returns in May amid mixed returns in global markets, according to Eurekahedge.
The Eurekahedge Hedge Fund Index was up 0.20 per cent during the month, while the MSCI World Index was down 0.45 per cent in May, according to the Eurekahedge June Index Flash.
“May started off on a good note with positive economic data from the US, leading to rallies in global equity markets, specifically in North America where market indices reached all-time highs, it said.
“The US dollar strengthened against most major currencies, going above 100 level against the Japanese yen for the first time since 2009. The positive sentiment turned mid-month amid weak manufacturing numbers from China and uncertainty regarding the withdrawal of the US Federal Reserve’s asset purchase programme.
“Most major hedge fund investment regions delivered positive returns in May, with Asia ex-Japan hedge funds reporting the strongest returns during the month. The managers outperformed the market for the third consecutive month gaining 2.35 per cent in May while the MSCI Asia Ex Japan Index was down 4.35 per cent - the largest returns posted by funds focused on Greater China, up 4 per cent in May. The Eurekahedge Japan Hedge Fund Index grew 0.42 per cent in May, bringing its year-to-date return to 18.34 per cent and extending their winning run to the ninth month making it the longest winning streak on record for Japanese funds. The month’s return represents an outperformance by the managers as the Nikkei 225 declined 0.62 per cent while the Tokyo Topix was down 2.52 per cent during May. The Japanese markets witnessed some volatility during the month as the Nikkei fell 7.3 per cent in a single day, amid concerns about US stimulus, before rallying at the month end after some positive announcements from the Japanese central bank.
“The Eurekahedge North American Hedge Fund Index was up 1.06 per cent in May bringing its year-to-date return to 4.46 per cent. The S&P500 was up 2.08 per cent in May but witnessed a mid-month trend reversal, declining to 1630 after reaching an intra-day high of 1687 in the fourth week of May. This trend was also witnessed across European bourses, however most European indices finished the month higher holding on to gains generated after the ECB’s rate cut. The Eurekahedge European Hedge Fund Index grew 0.83 per cent during the month.
“Returns were mixed among the different strategic indices, with distressed debt hedge funds posting the strongest gains of 1.87 per cent. Distressed debt managers have witnessed eleven straight months of positive returns, gaining 21 per cent since end-June 2012. The distressed debt sector gained earlier in the month from the positive sentiment around global economic data while the ECB rate cut triggered rallies in the European distressed bonds sector, but the increased risk aversion at the end of the month led to some losses. The BofA Merrill Lynch High Yield Index was down 0.43 per cent in May.
“CTA/managed futures funds posted the largest negative returns during the month, declining by 1.69 per cent on average. Trend-followers suffered due to the reversal in market sentiment mid-month, although some short-term systematic funds witnessed some gains. A number of managers also reported losses from the energy and precious metals sector. On the other hand some managers investing in FX delivered positive returns gaining from short AUD/USD positions.”