Widespread Losses Push Hedge Funds Down 0.54%

Jun 9 2011 | 2:19pm ET

Hedge funds were covered in red in May, with almost all strategies posting losses on the month, data from the Hennessee Group shows.

The Hennessee Hedge Fund Index lost 0.54% on the month, its first down month of the year. The index remains up 2.86% year-to-date.

"Most hedge funds lost money in May as risk assets experienced a sharp reversal due to concerns about the global economic recovery.  Commodities took the biggest hit, with silver declining 21% and oil falling 10% during the month,” Lee Hennessee said. “Hedge funds were positioned defensively, which allowed them to protect capital during the sell off.  Several managers used the sell off to add to high conviction core positions and reduce higher beta names."

Only six of the 26 strategies and substrategies tracked by Hennessee were in the black in May, led by healthcare and biotechnologies funds, up 1.77% (7% year-to-date) and short-biased funds, up 1.67% in May but still down 4.88% in a year that has seen the Standard & Poor's 500 Index rise almost 8%. Latin America funds rose 0.83% (down 0.08% YTD), technology funds 0.53% (5.55% YTD) and opportunistic funds 0.11% (2.9% YTD). Merger arbitrage funds were flat on the month (3.37% YTD).

That's all of the good news. Among major strategies, the closest any got to winning was long/short equity, down just 0.09% (up 4.01% YTD). Arbitrage and event-driven funds lost 0.71% (up 2.69% YTD) and global/macro funds 1.16% (up 0.46% YTD).

No strategy had a more miserable May than private investments in public equities and private financing funds, which lost 4.71% on the month to wipe out their year-to-date gains, leaving them down an average of 1.14%. Other prominent losers included macro funds (down 1.95% in May, down 1.42% YTD), international funds (down 1.55%, up 1.32% YTD), telecommunications and media funds (down 1.42%, up 4.85% YTD) and growth funds (down 1.11%, up 4.51% YTD).

On the bright side, despite all of the bloodletting, only five strategies are down on the year.

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