Global hedge funds continued to attract new capital in May as they crossed the US$2.1 trillion mark, following the fourth consecutive month of net capital inflows.
Hedge funds have received almost $60 billion in net capital in the year-to-date, data provider Eurekahedge reported.
In May, the Eurekahedge Index was up 1.15 percent with performance-based gains of $9.29 billion, as global markets showed signs of stabilization. However, hedge funds on average trail equity markets with a return of 1.91 percent since the beginning of the year, compared to the MSCI World Index, which was up 2.63 percent in the first five months of 2014.
“Global markets trended upwards as the Fed reiterated its dovish stance on keeping long-term interest rates low, in order to sustain an ongoing recovery in the U.S. economy after GDP figures showed that the US economy had contracted in Q1 2014,” Eurekahedge said. “Similar support built up in the Eurozone region where market participants expected the ECB to ease its monetary policy to stave off deflation worries, an expectation that was correctly realized when the ‘Draghi put’ was officially executed earlier this month in the form of negative interest rates on bank deposits.”
The best-performing hedge funds in May followed event driven, multi-strategy and long/short equity strategies with returns of 1.88 percent, 1.45 percent and 1.37 percent, respectively. Fund managers using arbitrage strategies delivered their 11th consecutive month of positive returns, up 2.03 percent for the year.
Emerging markets-focused funds, and in particular funds investing in India, produced strong returns of 2.24 percent. Funds investing in Eastern Europe and Russia recovered in May, gaining 8.37 percent, following a de-escalation of regional tensions over the conflict in Ukraine.
Japanese hedge funds, in turn, reported their first month of positive returns for 2014, up 0.8 percent in May. Japanese funds outperformed the Nikkei 225 by 8.58 percent for the year-to-date, the data provider said.
Islamic funds were the best performing investment vehicle for the year, driven by strong gains in Arabian markets. Equities in the GCC countries have seen a rally in 2014, with the Eurekahedge Middle East/Africa Islamic Fund Index gaining 10.18 percent in the first five months of the year.