Eurekahedge: Hedge Funds Gain 0.42% in May

Jun 14 2016 | 6:28pm ET

Hedge funds were up in May but underperformed world market benchmarks, according to a flash update from industry data provider Eurekahedge.

The company’s Hedge Fund Index gained 0.42% during the month, compared to 1.28% booked by underlying markets as represented by the MSCI World Index. Managers dealt with mid-month reversals across commodities and weaker equity performance in developing markets, said Eurekahedge, while the ongoing Brexit debate loomed large for some managers.

The Eurekahedge metric is the latest in a series of hedge fund industry measures to show positive performance in May. However, the company’s report also highlighted the rocky road ahead.

“With disappointing non-farm payroll (NFP) numbers from the U.S., the chances of a summer rate hike by the Fed look quite uncertain,” the company noted in its report. “[This is] despite it being an otherwise sensible course of action to take. While this might be a good opportunity for the Bank of Japan to step in with additional easing and take some pressure off the Fed, the chances of that happening given the recent fiscal easing remain low. We could be in for a hot summer that could make investors sweat.”

Other key highlights from the report:

  • Hedge funds are up 0.76% for the year as of the end of May 2016. On a year-to-date basis, 48% of managers were in the red this year compared to 20% of managers who reported year-to-date losses over the same period last year.
  • Distressed debt hedge funds posted the best gains during the month, up 1.65% with year-to-date returns of 2.64%. Distressed debt managers have had a rebound in 2016, compared to their performance over in 2015.
  • Latin American mandated hedge funds were the worst performers during the month, down 0.35%. Nonetheless, Latin American managers have outperformed the MSCI Latin American Index, which was down 6.01% over the same period. 
  • Asia ex-Japan managers gained 0.35% during the month and have lost 1.98% year-to-date. Meanwhile, underlying Greater China hedge funds dropped by 1.44% in May, with losses of 5.73% year-to-date, outperforming the CSI 300 Index which has declined 15.05% over the same period.
  • North American and Japanese managers were up 1.09% and 1.07%, respectively, followed by European managers with gains of 1.01%. On a year-to-date basis, North American managers led with 2.01% returns following a recovery from their February lows.
  • Japanese hedge funds were down 2.91% in the first five months of 2016, their worst year-to-date return on record. 
  • On a year-to-date basis, emerging market mandates lead the tables with the Eurekahedge Eastern Europe & Russia Hedge Fund Index up 10.34% followed by the Eurekahedge Latin America Hedge Fund Index, up 8.51%.
  • The CBOE Eurekahedge Short Volatility Hedge Fund Index was up 1.95% during the month as volatility levels declined towards the latter half of May. On a year-to-date basis, short volatility managers were up 1.46%.
  • CTA/managed futures and macro hedge funds posted the steepest losses during the month, 0.62% and 0.45%, respectively. 
  • Arbitrage managers were up 1.10% during the month while long-short equities managers held their ground and were up 0.97% over the same period, despite mixed performance in the equity markets. 

Eurekahedge’s update was based on 51.51% of funds that have reported May 2016 returns as of June 14. The company tracks asset flows, hedge fund performance and regional key trends across the hedge fund universe, tracking more than 130 data points on more than 24,000 alternative funds in its database.

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