GREENWICH, Conn. (HedgeWorld.com)–Hedge funds in the Van Global Hedge Fund Index staged a rally in May, rising 0.9% collectively and giving the broad index a 0.2% return year-to-date through May 31.
Falling long-term interest rates, rising equity markets and a strengthening dollar all helped managers in the Van index enjoy a decent month, said VAN Vice President Kevin Campbell. “Those managers with a directional bias took advantage of trends in these areas, among others,” he said.
Among those others was a currency play on the European Union constitution. “?? 1/2 [T]he long U.S. dollar?? 1/2 short euro trade was particularly profitable as concerns about the possible (and eventual) rejection of the European constitution by French and Dutch voters led to a change of more than 4% in the spot price between the two currencies from the beginning of May to month-end,” Mr. Campbell said.
Directional strategies overall earned 2% in May, according to the Van index. Macro fund managers returned 1.3%, market timing funds 0.8% and futures funds 2.4%.
Long/short equity managers who focus on shorts were hurt by the improving equity markets in May. The Standard & Poor’s 500 stock index, for instance, rose 3.18% last month, while the MSCI World Equity Index was up 1.5%. Short-selling specialists in the Van index fell 4.1% in May, the worst performance among the various strategies tracked by the index.
Convertible arbitrage funds added to their negative performance thus far in 2005, falling 1.4% in May.
“Long/short equity funds with a dedicated short bias ?? 1/2 gave back nearly half of their gains from the first four months of the year, and convertible arbitrageurs continued to struggle,” Mr. Campbell said. “The short-biased funds were clearly hurt by the strength of the equity markets, while managers focusing on convertible arbitrage were plagued by continued concerns about redemptions from the strategy and rumors of hedge fund collapses.
For the year, short sellers are still positive, up 4.4%, while emerging markets managers are up 3.8%. Aggressive growth managers, despite their May numbers, are down 3.1%, the second-worst performing strategy in the index after futures, which are down 3.6%.
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