Funds Hub

Money managers under the microscope

Time to crack open the champagne?

June 8, 2009

May was a bumper month for the battered hedge fund industry with an impressive 5.23 percent return, the best monthly gain in almost a decade.

rtr244m8The data, from Hedge Fund Research, takes returns for the first five months of the year to 9.43 percent. After last year’s record losses, this is a much healthier figure and more reminiscent of the returns during the industry’s boom years such as 1999 or 2003.

Early data from Credit Suisse/Tremont meanwhile puts the monthly return at 3.61 percent, making a year-to-date 6.25 percent.

So are the good times back for hedge funds?

Well, possibly not. While the headline figure looks good, it comes during what Sarasin’s Guy Monson calls “a most extraordinary rally”. The MSCI World index is up 8.67 percent this month, while for the first five months of the year it has risen 5.4 percent.

Among the best performers in May were, according to HFR, equity hedge (up 7.09 percent, while performance from energy and basic materials funds was even better) and convertible arbitrage (up 5.08 percent). In both cases the underlying assets are rebounding strongly from last year’s losses.

While gains will be welcomed, investors are likely to have long memories about the losses hedge funds suffered in the bear market and may be unimpressed by funds that simply rise and fall with markets, especially if those funds had once sold themselves as able to make money in all weathers.

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