May Flowers: Hedge Fund Post Best Month In Nine Years

Jun 8 2009 | 1:10am ET

Harking back to better days in these troubled times, Hedge Fund Research said that May was the industry’s best month in more than nine years.

The HFRI Fund Weighted Composite Index surged 5.23% last month, its best single-month return since February 2000. The average hedge fund is up 9.43% year-to-date, just five months after ending one of their worst years in history, with an average loss of nearly 20%.

All of the HFRI strategy and substrategy indices were in positive ground last month; the worst performer, private issue and Regulation D funds, still managed a 0.37%. And only three substrategies—notably short bias funds, which, battered by the stock market rally, have lost 6.11% this year—are in the red through the first five months.

“After historical lows in 2008, risk appetite has quickly returned over the last eight weeks, suggesting that hedge fund investors are again looking past month-to-month volatility and focusing on the longer-term performance merits of the industry,” said Kenneth Heinz, president of HFR. “Following a period of consolidation, we expect industry growth to resume in the coming quarters, with an emphasis on transparent investment by institutional investors.”

Emerging markets funds—last year’s worst-performing strategy—continued their strong pace in May, rising an average of 9.74%. Russia and Eastern Europe funds and Asia ex-Japan funds did especially well on the month, soaring 13.27% (23.25% year-to-date) and 10.85% (19.46% YTD), respectively.

Equity hedge funds also posted a strong month, rising 7.09% (12.55% YTD). Stock funds were led by energy and basic materials funds, which rose 9.64% (22.66% YTD), and technology and healthcare funds, which added 6.78% (12.91% YTD).

Rounding out the major strategies, event-driven funds finished May with an average return of 4.19% (7.7% YTD), relative value funds jumped 3.73% (11.17% YTD) and macro funds added 3.01% (2.09% YTD).

Funds of hedge funds did a good deal less well, returning 3.25% to end May up 4.76% on the year.

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Editor's Note