Alt Investments
Hedge Funds Score Robust Gains In May

These investment entities, which remain important parts of the private banking and wealth jigsaw puzzle, broadly gained in May.
Hedge funds gained in May as equities recovered the prior month’s
decline, and as inflationary pressures remained elevated, but
investors positioned for interest rate reductions in the second
half of 2024, new figures show.
Led by directional equity hedge and event-driven strategies, the
HFRI Fund Weighted Composite Index rose by 1.3 per cent in May,
with additional positive contributions from relative value
arbitrage strategies offsetting a decline in macro strategies,
Chicago-headquartered Hedge Fund
Research said. For the first five months of this year,
the index is up more than 5 per cent.
(Equity hedge involves buying equity in some form, as an
underlying investment, and then securing a hedge to potentially
offset losses connected to market risk. With relative arbitrage,
an investor invests in a pair of related securities, exploiting
mis-pricings between the two.)
The HFRI Equity Hedge (Total) Index rose 2.5 per cent in May,
reversing the April decline and marking the fifth gain for this
index in the trailing seven months, posting its strongest monthly
return since February, HFR said.
Hedge funds haven't always enjoyed strong returns – and some
strategies have hit trouble, prompting pushback against their
relatively high fees. However, despite certain naysayers such as
Warren Buffett, they appear to be a fixture in the wealth
management landscape. At a briefing last week for journalists by
Switzerland's Union
Bancaire Privée, reporters heard how recent shifts in
interest rates, for example, have been positive for macro funds.
For merger arbitrage funds, however, conditions are challenging,
given political/regulatory obstacles to M&A deals, Kier
Boley, co-head and chief investment officer of UBP AIS, said.
“The hedge fund industry is in good health in terms of
performance,” Boley said.
Gains and change
Elsewhere, HFR said its HFR Cryptocurrency Index surged 13.6 per
cent in May; that index shows year-to-date performance of 38.04
per cent. The HFR Blockchain Composite Index is up 37.51 per
cent.
About 70 per cent of hedge funds produced positive performance in
May.
Event-Driven strategies, which often focus on out-of-favour, deep
value equity exposures and speculation on M&A situations,
also advanced in May, driven by multi-strategy and distressed
exposures. The HFRI Event-Driven (Total) Index gained 1.6 per
cent for the month, led by the HFRI ED: Multi-Strategy Index,
which jumped 2.35 per cent, and the HFRI ED: Distressed Index,
which added 1.7 per cent for the month.
The HFRI Relative Value (Total) Index added an estimated 0.6 per
cent for the month, increasing its year-to-date 2024 return to
3.3 per cent.
Macro strategies posted mixed performance in May as interest
rates and financial market volatility fell. The HFRI Macro
(Total) Index fell 0.65 per cent in May, the first monthly
decline since November 2023.