Indices Show Up Month For (Most) Hedge Funds

Jun 13 2007 | 10:56am ET

Another pair of hedge fund indices confirm that you would have been better off investing in a passive index fund this year, so far. Better off, that is, unless your hedge fund bets are in market-directional funds.

Hedge Fund Research’s HFRX Global Hedge Fund Index rose 2.55% last month—up 6.46% year-to-date—buoyed by the performance of its market-directional components, which rose 4.03% last month, more than doubling its year-to-date returns, which now stand at 7.79%. By contrast, the Standard & Poor’s 500 rose 3.49% in May and is up 8.77% in 2007.

Equity long/short funds were far and away the best performers, according to Dow Jones Indexes. Five of its six Dow Jones Hedge Fund Strategy Benchmarks were up last month, but none as dramatically as equity long/short, which rose 3.65% on the month and is up 10.84% on the year. No other strategy was up as much as 2%, though merger arbitrage, with its 1.94% return in May, is still up a very respectable 9.53% in 2007.

Macro funds also had a strong month, according to HFR, rising 3.78% in May (7.62%). Event-driven remains the top-performing strategy year-to-date at 10.09% after a 3.15% May jump. Equity hedge also did well, adding 3.02% (7.62% YTD). None of the HFRX indices were in negative ground last month, though some were close—equity-market neutral, a bad place to be when the equity markets are soaring, adding just six basis points (5.66% YTD)—and one, volatility, remains down 2.37% year-to-date in spite of a positive 1.04% return in May.


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