Hedge funds had a decent time in May. During the month, all major strategies showed a positive return except for managed futures. The monthly report from eVestment found that the average return of a hedge fund was 1.23% in May, bringing up average returns for the 5-month period to 2.2%.

Hedge funds Performance

Activist hedge funds grab highest return since Jan 2013

Of particular note were activist hedge funds, which generated their highest gain since January of last year. The event-driven activist hedge funds followed by eVestment were up 3.92% on average in May, thus managing a 4.5% return YTD. These hedge funds caught a break in May after a run of lackluster performance in 2014. Activists had won the highest returns in 2013 as well, with names like Larry Robbins’ Glenview, Nelson Peltz’ Trian Fund Management and Dan Loeb’s Third Point adorning the best-performing list of hedge funds last year. According to eVestment, activist hedge funds are up 15% over a 12-month period and have generated the most volatile returns in 2014 across all strategies.

Credit and India-focused hedge funds in the green

Credit hedge funds have been having a great run this year as well. With treasury yields on a consistent decline, this strategy has made its ninth consecutive month of positive returns. Credit was up 1.03% in May and has gained 3.9% for the year. Meanwhile distressed funds were up by the same number in May and are now sitting on a 4.75% return for the year. The report noted that large managed futures funds gained, whereas their smaller counterparts lost in May. On a regional comparison, India-focused funds have returned an unprecedented 17.5% YTD.

Hedge funds Exposure

Stock prices rise under activists

Over the last few weeks, a flurry of 13D filings have been made which have presented new activist stakes from hedge funds. These hedge fund managers are known to move stocks when they go long or short on a company, therefore, a sharp increase in stock price also benefits their holdings. Carl Icahn initiated the largest position in Family Dollar Stores, Inc. (NYSE:FDO), and that situation has already heated up after a poison pill response from the company. Wall Street’s other celebrity-status activist, Bill Ackman, has also been busy this year. Ackman bought a 9.7% stake in Botox-maker Allergan, Inc. (NYSE:AGN) and then proceeded to arrange a buy-out offer for the company. Allergan’s stock has gained nearly 50% this year.

Hedge funds investor flows

Mick McGuire, an up and coming activist who nabbed a +26% return  last year, filed a 13D showing a 7.2% stake in  Life Time Fitness, Inc. (NYSE:LTM). McGuire’s Marcato Capital Management is known as an aggressive activist and holds a concentrated portfolio invested in a handful of companies. Seth Klarman’s Baupost Group, which has several investments in pharmaceuticals and gold, initiated another position in Keryx Biopharmaceuticals (NASDAQ:KERX). Baupost Group disclosed a 10.7% stake in the company in May.

These hedge funds have several other activist holdings which have also been doing well. The above-mentioned names offer just a glimpse into their most recent activity.