Hedge Funds Continue Strong Late-Spring Run

Editorial Staff

8 June 2020

Hedge funds advanced in May, extending April gains as the reopening of businesses accelerated throughout the month, and in spite of historically high unemployment figures and nationwide political protests across major US cities, figures showed.

The HFRI Fund Weighted Composite Index® gained 2.5 per cent in May, led by the equity hedge and event-driven strategies, as reported today by .

The investable HFRI 500 Fund Weighted Composite Index gained 2.1 per cent for the month, bringing the two-month gain to 6.4 per cent. Since January, that index is down by 4.84 per cent. To put these figures into context, global equities have recovered sharply from their March lows after central banks and governments aggressively pumped money into the system – begging the question of how sustainable such a recovery is. The MSCI World Index of developed countries’ equities is down by only 3.09 per cent since the start of this year.

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The equity hedge performance was led by multi-strategy, technology, and fundamental growth exposures, with the HFRI EH: Multi-Strategy Index surging by 5.8 per cent. The volatile energy sector also extended April gains as oil posted a record monthly surge, with the HFRI EH: Energy/Basic Materials Index advancing by 4.1 per cent.

Event-driven strategies – such as those profiting from mergers and acquisitions – also rose, with the HFRI Event-Driven (Total) Index advancing by 2.9 per cent.

Investors are starting to take on more risk, enabling the hedge fund sector as a whole to make progress, Kenneth Heinz, president of HFR, said.

But he issued this cautionary note: “While recent gains have been compelling, the financial markets environment remains both fluid and opportunity-rich across asset classes, with the tailwinds of policymakers committed to accommodative interest rates and a resurgent retail consumer contrasting against the risk of additional virus impact or destabilising social unrest.”