Hedge funds extended their run of positive performance to seven months in May, and to 14 of the 15 trailing months, Hedge Fund Research reported this week.
The HFRI Fund Weighted Composite Index gained 0.5% for the month, bringing performance to 3.5% for the year to date.
“Hedge funds extended strong performance in May led by technology, currency and event-driven strategies, as [Emmanuel] Macron prevailed in the French election, emerging market volatility spiked and receded intra-month and equity-implied volatility fell to historical lows,” HFR’s president Kenneth Heinz said in a statement.
Macron’s victory in the May 7 second round election brought sighs of relief across Europe.
“As a result,” Heinz continued, “the thematic drivers of performance for 2H17 have shifted to include not only the Trump and Yellen trades, but also the volatility reversal trade and the increased risk associated with terrorism and cybersecurity. Managers positioned tactically long and short which are able to navigate both rising and falling volatility market cycles are likely to lead industry performance in 2H17.”
First quarter investor inflows helped push total hedge fund industry capital to $3.1 trillion, HFR reported in April.
However, wealthy individual investors appear to be less enamored with the sector than their institutional counterparts.
Event-driven strategies led gains in May, advancing 0.6% for their 11th consecutive monthly gain. Year to date, event-driven is up 3.9%.
The event-driven special situations and multi-strategy sub-indexes gained 1.3% and 0.7%. These positive returns were partially offset by an 0.3% drop in the distressed/restructuring sub-index.