Van Global Hedge Fund Index Grew 0.9% In May

by Carla Johnson, Investors Offshore.com

20 June 2005

The Van Global Hedge Fund Index gained 0.9% net of fees in May, according to hedge fund index provider Van Money Manager Research, LLC (VAN).

The Index represents the average return of hedge funds tracked by VAN and serves as one of the hedge fund industry’s longest-running benchmarks of overall performance. The year-to-date return for the Index is 0.2% net.

Speaking with regard to the results, VAN vice president, Kevin Campbell explained that:

“Hedge funds were able to benefit from declining long-term interest rates in the US, strong equity markets, and a surging US dollar.”

“Those managers with a directional bias took advantage of trends in these areas, among others. For example, the long US Dollar – short Euro trade was particularly profitable as concerns about the possible (and eventual) rejection of the European constitution by French and Dutch voters led to a change of more than 4% in the spot price between the two currencies from the beginning of May to month-end.”

“Long/short equity funds with a dedicated short bias, on the other hand, gave back nearly half of their gains from the first four months of the year and convertible arbitrageurs continued to struggle. The shortbiased funds were clearly hurt by the strength of the equity markets, while managers focusing on convertible arbitrage were plagued by continued concerns about redemptions from the strategy and rumors of hedge fund collapses.”

For comparison purposes, the S&P 500 and MSCI World Equity Index rose 3.2% and 1.5%, respectively, in May. On a year-to-date basis, these indices are down -1.0% and -2.5%, respectively, through May. The Lehman Brothers Aggregate Bond Index gained 1.1% during the month and is up 2.0% for the year.

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