Index Flash

Hedge funds end a ten month run of gains; still outperform

underlying markets

Eurekahedge Preliminary Report

Hedge funds were down 1.15%1 in May, ending a ten month winning run
for the industry. However managers in all regions outperformed their
respective underlying market indices, as the MSCI World Index declined
by 2.52%2 during the month.

Key highlights for May:

• Hedge funds in all regions outperformed underlying markets

• Net asset flows remained positive – US$4.7 billion of capital

invested in hedge funds

• Net asset flows for first five months exceed US$100 billion

• Latin American managers deliver positive returns for May, up

0.65%

• Relative value hedge funds up for twelfth consecutive month,

gaining 12.30% during this time

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Main Indices
Table 1: Main Indices
May 2011 2011 2010
Index
Est1 Returns Returns
Eurekahedge Hedge Fund Index -1.15 1.61 10.84
Eurekahedge Fund of Funds Index -1.31 0.27 4.48
Eurekahedge Long-Only Absolute
-0.14 1.32 15.25
Return Fund Index
Eurekahedge Islamic Fund Index -0.45 1.83 9.44

Regional Indices

Latin American hedge funds delivered the best performance in May,

making it the fourth consecutive month of positive returns. The
Eurekahedge Latin American Hedge Fund Index was up 0.65% during the
month, bringing its YTD return to 3.41%. The MSCI EM Latin America
Index was down 3.18%. Japan outperformed underlying markets, losing
0.24% while the Nikkei 225 declined 1.58%. Japanese managers had

1
 Index Flash

Hedge funds end a ten month run of gains; still outperform

underlying markets

been positioned conservatively at the start of the month and hence were
able to protect their capital in a market that tracked global movements
weakly.

North American hedge funds were down 0.36%, however the managers
provided considerable downturn protection during a volatile month. The
S&P 500 was near to a 3 year high at the start of the month; however it
declined 3.5% early on in the month, before recovering some of the
losses and closing 1.4% down for May. Similarly, European managers
registered losses of 0.52% which can be considered as significant
outperformance to the underlying markets – the MSCI Europe Index lost
4.28%.
Table 2: Regional Indices
May 2011 2011 2010
Index
Est1 Returns Returns
Eurekahedge North American Hedge
-0.36 3.68 13.58
Fund Index
Eurekahedge European Hedge Fund
-0.52 1.69 8.97
Index
Eurekahedge Eastern Europe & Russia
-3.47 2.27 16.63
Hedge Fund Index
Eurekahedge Japan Hedge Fund
-0.24 0.69 8.09
Index
Eurekahedge Emerging Markets
-0.76 2.20 10.56
Hedge Fund Index
Eurekahedge Asia ex-Japan Hedge
-1.62 0.63 10.23
Fund Index
Eurekahedge Latin American Hedge
0.65 3.41 9.71
Fund Index

Strategy Indices

May was marked by high risk aversion as concerns of the European

sovereign debt came to the fore once again and disappointing
macroeconomic outlook led to fears of slowing global growth. The month
started off with a reversal of the growth trend in April, leading to
significant losses for trend following strategies. CTA/managed futures
funds registered the largest declines, down 3.07% for the month, as
most commodities registered considerable losses while equity indices
trended lower. Managers trading in the fixed income space delivered the
best returns as bond prices continued the upward trend from April, as the
environment of high risk aversion increased demand for fixed income
assets. Relative value and fixed income hedge funds were up 0.25% and
0.49% respectively, while returns from arbitrage and distressed debt
funds were flat to slightly negative.
Table 3: Strategy Indices
May 2011 2011 2010
Index
Est1 Returns Returns
Eurekahedge Arbitrage Hedge Fund
0.01 2.91 9.00
Index
Eurekahedge CTA/Managed Futures
-3.07 -1.05 12.34
Hedge Fund Index
Eurekahedge Distressed Debt Hedge
-0.02 5.88 23.62
Fund Index
Eurekahedge Event Driven Hedge
-0.45 2.13 15.65
Fund Index
Eurekahedge Fixed Income Hedge
0.49 4.00 10.01
Fund Index
Eurekahedge Long/Short Equities -0.91 2.04 10.11

2
 Index Flash

Hedge funds end a ten month run of gains; still outperform

underlying markets

Hedge Fund Index

Eurekahedge Macro Hedge Fund
-0.79 1.09 7.98
Index
Eurekahedge Multi-Strategy Hedge
-0.50 2.18 9.56
Fund Index
Eurekahedge Relative Value Hedge
0.25 3.29 11.49
Fund Index

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1
Based on 30.65% of the funds reporting their May 2011 returns as at 8 June 2011.
2
The MSCI AC World Index Free – Local Currency

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