American Hedge Funds Report Best Month in a Decade

Date: Tuesday, June 9, 2009
Author: Walek & Associates

May appears to have been hedge funds’ best month since 1999, with the Absolute Return Composite Index rising an estimated 3.1% for the month. A result that strong would push hedge funds up a total of 6.11% this year, according to the Absolute Return database, which has received results so far for May from about 30% of reporting funds. This year’s gain is in sharp contrast to 2008, when hedge funds lost an average of 12%.

Two of the industry’s strategies are also reporting their best monthly results since HedgeFund Intelligence began keeping track in 1999.

On the back of tightening credit markets and a sentiment that the economy – and the housing market in particular – may be stabilizing, the Absolute Return Mortgage-Backed Securities Index gained an estimated 10.33% in May, up 14.3% for the year so far.

Convertible arbitrage is also reporting its best results ever, gaining about 5% for the month for a year-to-date total of 20%. MBS and convertible bonds were decimated by the financial crisis last year and had lots of room to move up.

Technology funds were the second-best performing strategy in May, with the Absolute Return Technology Index gaining an estimated 7.74% (for about 14% for the year so far). This year technology stocks have rallied even more than the broader stock markets.

Long/short equity funds have performed in line with the broader markets. The Absolute Return U.S. Equity Index gained an estimated 3.2% in May for a total of 6.38% for the year so far. A number of managers increased their exposure as the market began to rally in March. The Global Equity Index gained about 5% in May, getting a big boost from the stocks of emerging market economies, many of whom are benefiting from rising prices for commodities.