Rising Tide Lifts Hedge Fund, Indices Say

Jun 15 2007 | 11:25am ET

The booming equities market and a strengthening U.S. economy boosted hedge fund last month, according to two indices released today. The Credit Suisse/Tremont Hedge Fund Index rose 2.31% in May to reach 7.86% year-to-date, and the RBC Hedge 250 Index added 1.7% to hit 6.35% for 2007. Of course, the strong economy also lifted the broader markets, as the Standard & Poor’s 500 rose 3.49% on the month (8.77% YTD).

“The U.S. economy rebounded in May as job creation was double the April figures, unemployment held steady, consumer confidence rebounded from an eight-month low, and the manufacturing sector grew at its fastest rate in over a year,” Oliver Schupp, president of the Credit Suisse Index Co., said. “Overall, this market environment has been favorable for the majority of hedge fund strategies. Managed futures, in particular, were up 5.13% in May as managers generally profited from the strong performance of medium-term CTAs on the back of strong M&A activity, a positive economic outlook and a strong stock market.”

The strong month for managed futures was its second in a row; the strategy is now up 4.22% year-to-date after April 4.02% return and May’s 5.13%. Other strategies, however, have not needed a turnaround this year.

Event-driven continues to be the strategy to beat, rising 3.24% in May to hit an even 10% for the year, according to Credit Suisse. In particular, event-driven multi-strategy funds are booming, jumping another 4.31% last month to top all comers at 11.73% year-to-date.

Long/short equities were also boosted by the strong stock market, rising 2.31% in May (9.25% YTD). Dedicated short-bias, by contrast, took another bath, dropping another 2.2%—after last month’s 2.74% drop—and is down 3.31% year-to-date.

The Credit Suisse/Tremont Investable Hedge Fund Index was up 2.03% last month (6.06% YTD).

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