Hedge funds make hay in May rallies

THE HEDGE fund industry put in its strongest performance in almost a decade in May, as fund managers took full advantage of the relief rally in equity markets.

The industry put in a 5.2 per cent investment gain in May, the best seen since February 2000 according to leading US data firm Hedge Fund Research (HFR).

But the funds still have a long way to go to recover credit crunch losses – a report from rival research group TrimTabs has claimed that despite the gains seen this year the average hedge fund is still 17 per cent below their high points before the crisis.

Now the relief rally shows signs of having peaked, hedge fund managers are likely to remain below their pre-crisis highs for a while. TrimTabs said: “It should take around three years for the industry to make up these losses.”

The HFR report said hedge funds, based on its HFRI Fund Weighted Composite Index, have now gained over 9 per cent this year so far – but they lost 19 per cent last year.

But HFR president Kenneth Heinz said the recent gains are promising: “Following a period of consolidation, we expect industry growth to resume in the coming quarters.”