Hedge Funds End 10-Month Winning Run

Hedge funds fell 1.2 percent in May, ending a 10-month winning run, as market volatility from the European sovereign debt crisis increased, according to Eurekahedge Pte.

The Eurekahedge Hedge Fund Index, which tracks more than 2,800 funds worldwide, fell for the first time since June 2010, the Singapore-based data provider said in an e-mailed report. The index is up 1.5 percent this year through June.

Managed futures funds and CTAs, which use computer programs to search for price signals in futures markets from equities to oil and gold, were the worst performer in May after leading gains in April, the report said. The MSCI World (MXWO) Index fell 2.5 percent as concerns deepened over Europe’s debt crisis and that a slowing global recovery will crimp earnings.

“The macro picture combined with thin trading volume in Asia makes for a very difficult picture for a hedge-fund manager to read,” said Rory Kennedy, chief operating officer at Rogers Investment Advisors K.K. “Managers need to be able to move rapidly and not try to fight the market.”

Total assets under management were down by $5 billion, bringing the industry size to $1.82 trillion, Eurekahedge said. Performance-based losses totaled $13.1 billion, while managers attracted net positive asset flows of $8.1 billion, it said. Some $113.8 billion has been invested with the industry in the first five months of 2011, the report said.

Latin American funds delivered the best performance, returning 0.4 percent, while an index tracking Asia ex-Japan funds lost 1.9 percent, making it the worst performer, the report said. North American funds were down 0.8 percent, while European managers had losses of 0.6 percent, it said.

The report was based on 75 percent of the funds that have announced May results, the data provider said.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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