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CSFB/Tremont Index Down in May

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NEW YORK (–May wasn’t a stellar month for hedge fund managers. Still, managers in five of the nine Credit Suisse First Boston/Tremont* Hedge Fund Index categories had positive returns for the month.

The overall index was down 0.23% in May, and has produced meager 2.58% return for the year through May 31. Oliver Schupp, president of CSFB Tremont Index LLC, said in a statement that market conditions were driven by fears of interest rate hikes, terrorist attacks, rising oil prices and a slowdown in China.

The hedge fund index performed poorly in comparison with the Standard & Poor’s 500 stock index, which was up 1.37% in May. The Dow Jones Industrial Index underperformed the CSFB index for the month with a loss of 0.36%.

Shorting some of those blue chip stocks might have paid off for dedicated short-bias managers, who were the top performers last month. The strategy returned 0.76% in May. In April, the asset class led the pack as well returning 4.23% (see ). So far this year, short-bias strategies are up 0.90%.

Other strategies with positive performance in May were: fixed-income arbitrage, up 0.63%; equity market neutral, up 0.21%; event-driven, up 0.09%; and global macro, up 0.05%. The risk arbitrage and distressed sub-strategies also performed well, with returns of 0.44% and 0.26%, respectively. Distressed managers, which fall under the event-driven investment category, had the best performance for the year-to-date period with a return of 4.89% through May 31, according to index officials.

Event-driven multi-strategy, the third event-driven sub-strategy, was one of the losing strategies in May, posting a negative 0.09% return. Others having difficulty in the current markets were: convertible arbitrage, down 1.33%; emerging markets, down 1.81%; long/short equity, down 0.36%; managed futures, down 1.05%; and multi-strategy, down 0.13%.

The CSFB/Tremont Investable Hedge Fund Index returns differed in that fixed-income arbitrage was the leading strategy for the month and year-to-date. The index category in May was up 0.43% and is up 2.88% for the year.

Officials speculated that fixed-income arb managers are profiting from the their short bond market trades and inter-country spreads in U.S. and European government bonds. Event-driven managers also did well in the investable index with a year-to-date performance of 2.20%.

Meanwhile, the dedicated short-bias strategy, with a return of 0.14%, was the only other investment category to post positive performance in May. For the year-to-date, the asset class had a loss of 1.19% in the investable index.

*Tremont Capital Management Inc., Rye, N.Y., is a strategic partner of and a minority investor in HedgeWorld.

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Contact Robert F. Keane with questions or comments at:

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