Hedge Fund Performance May 2013: Returns Remain Modest as CTAs Struggle

Date: Wednesday, June 19, 2013
Author: Joanna Hammond, Prequin

Preqin's preliminary hedge fund benchmarks show that the positive, albeit modest, start to the year has continued into May, with average returns of 0.65%. This is the twelfth consecutive month that hedge funds have posted positive returns; the longest period since March 2009 to April 2010, and the first time since 2007 that no losses were reported in the first five months of the year. This takes the year to date return to 4.63%, which is higher than the same period last year (+3.02%).

Event driven funds were the top contributors to the benchmark, posting 2.10% in May, up from 1.13% in April. This was their best month since January, and ensures the strategy remains the top performing in 2013, with average returns of 7.60% for the year to date. Long/short vehicles also exceeded the overall hedge fund benchmark, making 0.75% in May to post 5.39% so far in 2013. The macro benchmark continues to lag behind other strategies, posting the lowest average return in May (+0.13%). Relative value funds continued their steady start to the year, posting 0.36% in May; the worst month so far this year. Multi-strategy funds produced an average return of 0.58% in May (down slightly from 0.66% in April). This brings year to date returns to 3.54%.

Asia-Pacific remains the top performing region in 2013 to date, posting average returns of 9.38% over this period. However, the region had a disappointing month, generating just 0.29%, down from 2.51% in April, and its worst month since July 2012 (+0.01%). In contrast, Europe-focused vehicles were the top performers in May, making 1.61%, to bring the year to date gain to 5.11%. The North America benchmark also improved from the previous month (+0.24%), to 1.20% in May.

Preqin’s early UCITS benchmarks indicate another reasonable month for these funds, with an average return of 0.77% in May, and 3.83% for the year to date. This exceeds the 1.03% UCITS hedge funds returned over the same period in 2012. Unsurprisingly, long/short vehicles were the main contributors to the benchmark, posting 1.49% on average. Macro was the worst performing strategy, posting -0.60% in May and -0.25% for the year to date, making it the only UCITS strategy to be in the red in 2013. Funds of hedge funds once again posted positive but small returns of 0.61% (+4.48% for 2013 to date). Long/short funds were key contributors to this benchmark, posting 1.74%, up from 0.61% in April.

CTA funds experienced the worst month of 2013 so far, posting losses of -1.82%, the biggest since October 2012. CTA vehicles have had a disappointing year, generating just 0.07% so far, compared to 3.07% during the first five months of 2012.