Investors Exhibit Renewed Appetite For Risk In May

by Phillip Morton, Investors Offshore.com

09 June 2009

Hedge funds posted the strongest gains in nearly a decade in the month of May, with the HFRI Fund Weighted Composite Index climbing over 5.2%, according to data released on June 8 by Hedge Fund Research.

May was the biggest single-month jump since February 2000, and the Index is up over 9% year-to-date. Recent gains follow volatile performance from 2008, a year in which the broad-based composite declined more than 19%.

While the HFRI Fund Weighted Composite was lifted by a broad equity market rally during the month, strategies focused on Energy and Emerging Markets posted the strongest gains. The HFRI Equity Hedge (Total) Index gained over 7% (also the strongest gain since Feb 2000), while the HFRI EH: Energy/Basic Materials Index gained 9.64% and the HFRI Emerging Markets (Total) Index gained 9.74%. All strategy areas tracked by HFR produced gains in May.

“After historical lows in 2008, risk appetite has quickly returned over the last eight weeks, suggesting that hedge fund investors are again looking past month-to-month volatility and focusing on the longer-term performance merits of the industry,” said Kenneth Heinz, President of HFR. He added: “Following a period of consolidation, we expect industry growth to resume in the coming quarters, with an emphasis on transparent investment by institutional investors.”

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