Hedge funds posted gains for the fourth consecutive month in May, led by Equity Hedge strategies, with significant contributions from Technology, Healthcare and Fundamental Value exposures, as reported by HFR.
The HFRI Fund Weighted Composite (FWC) Index advanced +0.7 percent for the month, bringing YTD gains for the HFRI FWC through May to +3.9 percent, leading both the S&P 500 and Dow Jones Industrial Average, while the HFRI Fund of Funds Index climbed +1.1% for May and +4.0% YTD.
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Hedge fund strategy performance was led by the HFRI Equity Hedge Index, which added +1.3 percent in May, the fourth consecutive monthly gain, bringing YTD to +5.1 percent and leading all main hedge fund strategies, as well as the S&P 500 and DJIA.
Equity Hedge performance was led by the HFRI Technology/Healthcare Index, which advanced +3.5 percent for May, leading all hedge fund sub-strategies; the Index has gained +8.5 percent YTD, also the leading area of sub-strategy performance. The HFRI EH: Fundamental Value Index gained +1.5 percent, bringing YTD performance for FV to +5.1 percent.
Partially offsetting these gains, the volatile HFRI Energy/Basic Materials Index declined by -1.4 percent for the month, the seventh decline in the past 9 months.
Event Driven strategies also advanced for the month, as M&A activity continued to surge, with the HFRI Event Driven Index gaining +0.6 percent, bringing YTD performance to +3.9 percent. Event Driven sub-strategy performance was led by HFRI ED: Multi-Strat and HFRI Merger Arbitrage Indices, which gained +1.1 and +0.9 percent, respectively, for the month. Through May, ED sub-strategy performance has been led by Special Situations and Activist strategies, with these gaining +5.2 and +5.0 percent, respectively.
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By GlobalDataFixed income-based Relative Value Arbitrage strategies posted gains in May as US and certain European bond yields increased, with the HFRI Relative Value Arbitrage Index gaining +0.5 percent for the month. RVA performance was led by HFRI RVA: Volatility Index, which advanced +1.4 percent in May, while the HFRI RV: Multi-Strategy Index, comprised of creditmulti
strategy funds, gained +0.8 percent. Volatility is the leading area of RVA sub-strategy performance YTD through May, advancing +6.0 percent.
Macro hedge funds were impacted by directional currency and commodity volatility in May, with the HFRI Macro Index unchanged for the month. Macro performance was led by fundamental strategies, with the HFRI Macro: Discretionary Thematic Index advancing +0.7 percent, while the HFRI Macro: Multi-Strat Index gained +0.5 percent. Systematic CTA strategies declined for the month, as the HFRI Macro: Systematic Diversified/CTA Index fell by -0.4 percent.
Through May, Macro sub-strategy performance was led by Currency exposures, with the HFRI Currency Index gaining +3.5 percent. The HFRI: Emerging Markets Index posted a narrow decline of -0.06 percent for May, though EM leads regional exposures YTD with a gain of +6.5 percent.
HFR president Kenneth J. Heinz said: "May was another exciting month for hedge fund performance, as drivers shifted from the EM-dominated gains in April to a broad base of contributions from developed market equities, specifically Technology and Healthcare, as well as M&A, Discretionary Macro and Fixed Income exposures.
"Hedge fund exposures and performance have effectively adapted to this dynamic and fluid macro environment, leading established benchmarks of equity market performance through May. As rates have begun to rise, a continuum of macroeconomic scenarios represents opportunities for funds which are able to generate performance through tactical execution and positioning."
