16 Jun 2010
“Sell in May,” they say, and yes, that age-old adage was borne out once again this year, at least until the last week or so.
May was a tough month for hedge funds, no doubt about it. Latest data from the index providers saw the RBC Hedge 250 down 2.42% for the month and the Credit Suisse/Tremont Hedge Fund Index down 2.76%, its largest drop since November 2008. Oliver Schupp, president of Credit Suisse Index Co, said nine out of 10 strategies were in negative territory in May.
Particularly hard hit were funds specialising in emerging markets, long/short equity and managed futures, while short bias funds had what will likely be one of their best months of the year, with the average short bias fund in the Credit Suisse index up by over 5%.
Underlying markets had an even worse month however, with the FTSE 100 losing more than 6% over the month, and the S&P 500 down 8.2%. In the bond markets, political uncertainty in the UK both before and after the election result, and the ongoing fracas over the Greek bail-out impacted many European bonds, not to mention the euro. Yields on UK 10 year gilts increased while euro sovereigns were punished with every new announcement from Brussels and Berlin.
This volatility, combined with some major trends in the currency markets, could have provided managers with some of the most interesting opportunities they are likely to see all year, but market sentiment changed convincingly later in the month. Being able to react to this in time would have made a great deal of difference to returns in May.
June figures are likely to be better: indeed, how could they be worse? We are seeing major equity market indexes trending upwards again, and increasingly positive sentiment around the euro. Whether this can prevail into the second half of the month remains to be seen, but with the FTSE at time of writing set for a seventh straight day of positive performance, it is hard to see how hedge funds can put in a worse month than May 2010.
May was a tough month for hedge funds, no doubt about it. Latest data from the index providers saw the RBC Hedge 250 down 2.42% for the month and the Credit Suisse/Tremont Hedge Fund Index down 2.76%, its largest drop since November 2008. Oliver Schupp, president of Credit Suisse Index Co, said nine out of 10 strategies were in negative territory in May.
Particularly hard hit were funds specialising in emerging markets, long/short equity and managed futures, while short bias funds had what will likely be one of their best months of the year, with the average short bias fund in the Credit Suisse index up by over 5%.
Underlying markets had an even worse month however, with the FTSE 100 losing more than 6% over the month, and the S&P 500 down 8.2%. In the bond markets, political uncertainty in the UK both before and after the election result, and the ongoing fracas over the Greek bail-out impacted many European bonds, not to mention the euro. Yields on UK 10 year gilts increased while euro sovereigns were punished with every new announcement from Brussels and Berlin.
This volatility, combined with some major trends in the currency markets, could have provided managers with some of the most interesting opportunities they are likely to see all year, but market sentiment changed convincingly later in the month. Being able to react to this in time would have made a great deal of difference to returns in May.
June figures are likely to be better: indeed, how could they be worse? We are seeing major equity market indexes trending upwards again, and increasingly positive sentiment around the euro. Whether this can prevail into the second half of the month remains to be seen, but with the FTSE at time of writing set for a seventh straight day of positive performance, it is hard to see how hedge funds can put in a worse month than May 2010.
