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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.

 

 

 

Medians

Strategy

May-09

YTD

Mortgage Backed

10.33%

14.30%

Technology

7.77%

14.05%

Convertible & Equity Arbitrage

5.09%

20.02%

Global Equity

4.89%

9.01%

Distressed

4.38%

8.88%

Commodities

4.36%

2.87%

Macro

3.76%

3.91%

Latin American Equity

3.58%

12.27%

Latin American Debt

3.37%

8.84%

US Equity

3.20%

6.38%

Credit

2.78%

6.91%

Fixed Income

2.64%

6.61%

Multi-Strategy

2.63%

7.04%

CTAs

2.29%

-0.41%

Event Driven

2.20%

7.83%

Arbitrage

0.20%

3.65%

Composite

3.10%

6.11%