The Hennessee Hedge Fund Index confirms what you may already have heard: May was a tough month for hedge funds.
The index lost 1.98% on the month bringing its year-to-date gains to 2.15%. Hedge funds did outperform the S&P 500, which shed 6.27% in May (although it remains up 4.19% YTD).
“May was a tough month for risk assets,” said Charles Gradante, Hennessee Group managing principal. “European worries returned with vengeance resulting in a flight to quality and ‘risk off’ trading. Despite conservative positioning, hedge funds posted their worst monthly loss since September 2011, falling -2%. Many managers are frustrated that they did not ‘sell in May and go away’. May turned out to be a repeat of the previous two Mays [2011 and 2010] due to renewed worries over a financial crisis in Europe, a hard landing in China, and an economic slowdown in the U.S.”
Equity long/short managers shed 1.89%, their worst monthly loss since September 2011, although they remain up 2.27% YTD. Arbitrage/event driven funds declined 0.90% (up 2.33% YTD), while distressed funds fell 1.58% (up 3.82% YTD).
Merger arb funds shed 0.24% in May (but remain up 2.55% YTD) while convertible arbitrage funds were down 0.44% (up 3.98% YTD)
Global macro funds dipped 3.37% in May (up 0.49% YTD) and international managers lost 2.79% (up 2.29% YTD). Emerging markets funds plummeted 7.44% on the month (and are down 2.91% YTD). Macro managers declined 0.54% in May (but are up 0.24% YTD).