More than 70% of the hedge funds tracked by Barclay Group had negative returns in May, with an average loss for all funds estimated at 3.09%. Overall, the Barclay Hedge Fund index declined 1.78%, and 11 of its 18 hedge fund indexes were down in May, Barclay Group said in a statement. The emerging markets index was at -4.73%; followed by technology at -3.44%; European equities, -3.37%; and Pacific Rim, -3.24%.
"Rising interest rates have been draining liquidity from global capital markets. Directional equity strategies took the brunt of the losses, reflecting price declines in the stock markets of industrialized and emerging economies," Sol Waksman, president of the hedge fund tracking firm, said in the statement. The hedge fund strategies with the best returns in May, based on Barclay Group indexes, were funds that use shorting strategies, up 4.97% for the month; distressed securities, 1.12%; convertible arbitrage, 1.11%; fixed income, 0.62%; and multistrategy, up 0.52%.
By comparison, year-to-date hedge fund returns in many categories were strong, according to data from Hedge Fund Research. The HFRI Weighted Composite index was up 6.72% year-to-date May 31 but was -1.16% for May. Despite being down 3.98% in May, the HFRI Emerging Markets index was up 10.67% year-to-date, The HFRI Emerging Markets Eastern Europe/CIS index also performed well for the first five months of 2006, up 18.58%, compared to -5.98% in May; and the Asia sleeve of the Emerging Markets index was up 12.78% year-to-date, compared to -3.63% in May. Of the hedge fund strategies HFR tracks, the worst performer in the first five months of the year was the Short Selling index at 1.34%, compared to 3.65% in May alone.
