Hedge funds witnessed the fifth consecutive month of net allocations in May, despite global markets experiencing mixed returns.

According to Eurekahedge, May saw the seventh consecutive month of positive returns, posting year-to-date returns of  3.89 percent. The total asset flows for 2013 currently stand at US $50 billion with total size of the industry pegged at US $1.87 trillion.

Despite the MSCI World Index down by 0.45 percent in May, the Eurekahedge Hedge Fund Index was up 0.20 percent. The following table depicts returns posted by the Main Eurekahedge indices:

Eurekahedge main indices

Eurekahedge is currently tracking almost 500 funds. These funds have delivered more than 15 percent year-to-date and 250 funds that are up by over 20 percent year-to-date.

The month of May began on a good note with a positive flow of economic data emanating from the U.S., resulting in rallies in global equity markets. North America’s indices reached all-time highs. The U.S. dollar also appreciated against several major currencies with the U.S. dollar crossing the crucial 100-mark against the Japanese yen. However the positive sentiment got punctured with poor manufacturing numbers reported by China and rumors spread on a possible withdrawal of the U.S. Federal Reserve’s stimulus program.

Asia Ex-Japan Hedge Funds Outperform

Asia ex-Japan hedge funds outperformed underlying markets for three consecutive months. These funds were up 3.26 percent since the end of February.

As reported earlier, the HFRX Multi-Emerging Market Index provided a 5.9 percent return through April, with Asia hedge funds posting strong performance, Chinese funds generated 8.8 percent return, while Korean funds were up by 10 percent and Asia ex-Japan funds generated 8.1 percent return.

The following table depicts returns delivered by the various regional indices:

Eurekahedge Regional Indices

As can be seen from the above table, most major hedge fund investment regions delivered positive returns in May, with Asia ex-Japan hedge funds reporting the strongest returns during the month. The managers outperformed the market for the third consecutive month gaining 2.35 percent in May while the MSCI Asia Ex Japan Index was down 4.35 percent. Incidentally the largest returns were posted by funds focused on Greater China, which was up 4 percent in May.

The Eurekahedge Japan Hedge Fund Index also posted a maximum year-to-date return of 18.34 percent and extended its winning streak to the ninth month. This proved to be the longest winning streak on record for Japanese funds. However Japanese markets experienced some volatility during May, as the Nikkei fell 7.3 percent in a single day, amid concerns on the withdrawal of U.S. stimulus program. Japanese markets rallied later on the back of positive news from Bank of Japan.

The Eurekahedge North American Hedge Fund Index was up 1.06 percent in May bringing its year-to-date return to 4.46 percent.

Mixed Returns From Strategy Indices

As seen from the following table, different strategy indices saw mixed returns with the strongest gain of 1.87 posted by distressed debt hedge funds. These funds have posted eleven straight months of positive returns, gaining 21 percent since end-June 2012.

Eurekahedge Strategy Indices

However, the largest negative returns were posted by CTA/managed futures funds during May. On an average, these funds declined by 1.69 percent. Besides energy and precious metals sector posted losses. Managers investing in FX delivered positive returns, aided by gains from short AUD/USD positions.