Hedge funds post May losses from choppy markets

Date: Thursday, June 2, 2011
Author: Margot Patrick, MarketWatch

Most hedge funds lost money in May's volatile markets, with stock- and commodity-focused funds bearing some of the biggest losses.

The HFRX Global Hedge Fund Index tracking about 250 funds fell 1.83% in the month as of May 27, wiping out earlier returns this year for a 0.97% year-to-date loss.

Its equity hedge sub-index, tracking funds that take long and short bets on stocks, was down 3.4%, while systematic macro funds that rely on computers to buy and sell stocks, currencies, commodities and interest-rate instruments lost 2.13% in the period.

The losses came in the worst month for stocks since August. The MSCI World Index of equities lost 2.45% and the S&P 500 declined 1.4%. Commodities took an even bigger hit as worries grew over the strength of the global economic recovery, with silver off by 21% and oil slipping 10% in the month.

The price swings made for a choppy month for systematic strategies that look to latch onto directional moves in managed-futures markets. These funds typically hit their stride when there are clear price trends up or down in various asset classes, and can be wrongfooted by sudden reversals.

Man Group PLC's AHL Diversified PCC fund, part of its $23 billion AHL investment strategy, lost about 4.6% between May 2 and May 30, the fund said in a filing Tuesday.

It was also a tough month for funds focused on equities and credit. Third Point LLC's publicly traded vehicle, Third Point Offshore Investors Ltd. (TPOG.LN), Wednesday reported a 0.4% loss for the month, its first monthly decline in nearly a year.

The fund it tracks, Third Point Offshore Fund Ltd., is still up 9.7% for the year, though, far more than most of its peers. Last month, Third Point said it wouldn't accept most new fund subscriptions from July 1, after the fund's sharp growth to $7.2 billion, from around $2.3 billion at the start of 2009.

The firm couldn't immediately be reached to comment Wednesday on its May performance.