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Hedge Funds Maintained Momentum in May

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Hedge funds in May reported their fourth straight monthly gain, according to Hedge Fund Research.

The HFRI Fund Weighted Composite Index was up 0.7%, raising its year-to-date return to 3.9% — ahead of both the S&P 500 and the Dow Jones Industrial Average.

The HFRI Fund of Funds Index climbed 1.1% for May and is up 4% for the year.

May’s performance was driven by a shift away from the emerging-markets-dominated gains in April to broad contributions from developed market equities, led by technology and health care, HFR reported.

The HFRI Equity Hedge Index led all main strategies, adding 1.3% in May, and bring its gain since January to 5.1%.

The HFRI Emerging Markets Index dipped by 0.1% in May, only slightly denting its year-to-date gain of 6.5%.

As mergers and acquisition activity continued to surge, event-driven funds finished up 0.6% in May. The multi-strategy and merger arbitrage sub-strategies also advanced 1.1% and 0.9%, respectively.

The HFRI Relative Value Arbitrage Index gained 0.5% for the month as U.S. and certain European bond yields increased.

Directional currency and commodity volatility left macro hedge funds unchanged in May.

“Hedge fund exposures and performance have effectively adapted to this dynamic and fluid macro environment, leading established benchmarks of equity market performance through May,” HFR president Kenneth Heinz said in a statement.

“As rates have begun to rise, a continuum of macroeconomic scenarios represents opportunities for funds which are able to generate performance through tactical execution and positioning.”

— Check out Meredith Whitney Done Managing Money After Hedge Fund Flop on ThinkAdvisor.