Hedge funds displayed strong performance in May after posting losses in March and April, following uptrend witnessed in the global markets.

Independent data provider Eurekahedge in its June report points out that on a year-to-date basis, hedge funds are up 1.88% as against 2.63% clocked by the MSCI World Index in the first five months of 2014.

Hedge funds asset flows in May 2014

Analyzing the asset flows in hedge funds, the report highlights that the current AUM of the global hedge fund industry is at a record high of $2.1 trillion while the net asset inflows for May stands at $2.1 billion. The following graph captures the summary of monthly asset flow data since January 2011:

Hedge Funds Asset flow since 2011

As tabulated below, the Eurekahedge report points out preliminary data for May shows that managers have posted performance-based gains of $11.1 billion:

Performance-based changes

Slicing the data based on geographic mandate, the report notes North American funds posted the highest net asset inflows of $1.6 billion while recording performance-based gains of $7.2 billion during May.     Asset flows attributed to European fund managers were marginally negative in May, while Asian funds had a positive month in May. The asset flow trends are captured in the graph below:

Asset flow by geographic mandate

Long/short equities maintain momentum

The report highlights that fund managers deploying event driven strategies witnessed the largest net asset inflows of $0.9 billion, while arbitrage and multi-strategy recorded inflows $0.8 billion and $0.5 billion respectively. However, CTA/managed future strategies witnessed net outflows of $1.0 billion in May.

On a year-to-date basis, event driven strategies lead the tables with gains of 3.96%, while posting performance based gains of US$6.5 billion and attracting US$7.6 billion in new capital allocations.

Interestingly, long/short equities hedge funds witnessed their 18th consecutive month of positive net asset flows bringing in US$0.2 billion in May as investors continued to park their funds with the said strategy. The following graph sets forth asset flow by strategy employed:

Asset flow by strategy

Strong returns in May

The Eurekahedge report highlights that all hedge fund regional mandates ended the month in positive territory. Asia ex-Japan managers were the best performers during the month, returning 1.60%, supported by encouraging news out of the world’s two most populous countries – China and India.

Moreover, the Eurekahedge Hedge Fund Index reached new heights during May as hedge funds rebounded strongly in May following losses in the previous two months. Some of the factors aiding such positive trend include the Fed’s reiterating its dovish stance on keeping long term interest rates low to sustain an ongoing recovery in the US economy, while Japan posted improved inflation data.

The following graph captures returns across regions in the past two months:

Returns across regions

Dedicating a separate section to track key trends in Latin American hedge funds, the Eurekahedge report points out since the start of 2010, overall Latin American funds have posted performance based gains of $12.1 billion, while recording net asset outflows of $5.8 billion. The following table captures the monthly assets flows in Latin American hedge funds since December 2010:

Latin America-Monthly asset flows