For the second time in the last two months, hedge funds outperformed the S&P 500, returning an average of 1.2% net while the S&P 500 lost -2.4%, said George P. Van, chairman of Van Hedge Fund Advisor International, Inc. (VAN), a leading hedge fund advisory firm . The average hedge fund also beat the S&P 500 on a year-to-date basis, returning 10.7% net worldwide, while the S&P 500 has returned 6.5%.

"Almost 90% of the funds that comprise our U.S. Index beat the S&P 500 in May, with over 68% producing positive returns," said Van. "While all but two of the U.S. investment strategies we track generated positive returns, U.S. Opportunistic funds were the big winners in May, returning 4.6% net to investors. This brings their year-to-date return to 16.3%, well ahead of the Average Equity Mutual Fund's 5.8% year-to-date return and the S&P 500's 6.5% return. They also outperformed the NASDAQ and the Dow, which have returned 12.8% and 15.8% this year to date."

"Small cap stocks continued their recovery. This was good news for many managers who rely heavily on small to mid-cap stocks for their long positions. U.S. Value managers especially benefited from this resurgence, returning 1.2% net to investors, bringing their year-to-date return to 11.0%.

"Despite some widening of crucial spreads, Market-Neutral Arbitrage funds globally continued to perform well in May, returning 1.2% on average. In fact, the average Market-Neutral Arbitrage fund has returned 7.5% this year to date, ahead of the S&P 500. This is particularly noteworthy in that most market-neutral funds are not designed to track the major stock market indices," noted Van.

"Instead, they are specifically designed to produce consistent positive returns with relatively low correlations to the markets and low downside volatility. This is sometimes achieved at the expense of high returns. This year, however, Market-Neutral Arbitrage funds have achieved their goals and managed to generate high returns at the same time."

"Overall, hedge funds are shining in the current market environment. If the year continues to be volatile, hedge funds could produce superior returns and provide valuable downside protection in traditional long-only portfolios," Van concluded.

The best performing hedge fund strategies for May were U.S. Opportunistic, Offshore Special Situations and U.S. Special Situations, which returned 4.6%, 2.6% and 2.5%, net, respectively. Year to date through May Offshore Aggressive Growth leads the strategies with a 21.0% return, while Offshore Emerging Markets and U.S. Macro follow with 20.0% and 18.8% net returns, respectively.

Van Hedge Fund Advisors International, Inc. provides monthly hedge fund returns, as well as other hedge fund information, at www.vanhedge.com. 

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