Hedge funds returned 1.32% last month, as tracked by financial technology solutions firm eVestment, with event-driven and India strategies standing out as the best performers.
The asset class underperformed the S&P 500 Total Return index’s 2.35%.
Of the 11 strategies tracked by eVestment, event-driven and distressed outperformed long/short equity.
eVestment's findings were based on information taken from its research database, which comprises 7,784 active funds from across the globe managing $1.8 trillion in assets.
Event-driven (activist) came top in May, returning 3.92% for the second highest monthly return since January last year. In the first four months of this year, the strategy returned 4.46%, second to 4.75% for distressed, which gained 1.03% last month.
Event-driven saw the second largest inflow, $26.6 billion, in the first four months, after only long/short equity, which attracted $28.12 billion.
Long/short returned 1.96% in May and 2.35% year to end-April, with inflow of $2.79 billion in April and $28.12 billion in the first quarter.
Commodity strategies were the worst performers in May, falling 0.52%, having returned 1.67% in the year to end-April. They were the only funds to record aggregate outflow this year. In April, redemptions totalled $460 million and in the first quarter they reached $1.47 billion.
The entire hedge fund industry’s assets under management reached an estimated $2.95 trillion in the first quarter.
Among emerging markets, India strategies were the best perfomers in the first four months. Hedge fund exposure to the sub-continent returned 17.47% in the year to end-April and 6.75% in May.
Apart from Brazil, whose year-to-date return was just above zero, other emerging markets produced negative returns.
“Russia-focused funds posted significant gains last month, but remain largely negative for the year; while the election result in India kept the country’s momentum positive,” said eVestment.
Meanwhile, on Wednesday the firm released a report focusing on India based on a survey exploring institutional investors’ exposure to the country’s equity markets.
European investors (ex-UK) have the largest exposure percentage-wise, with $8.82 billion, or 65% of the total institutional AUM of $13.6 billion invested in Indian equities.
Compared with other investors, public and corporate pension plans maintain the largest weightings of total institutional assets in emerging market equity strategies (34.2% and 29.2%, respectively).
Sub-advised accounts, sovereign wealth and defined contribution plans favour EM strategies with higher levels of exposure to India.
There is widespread expectation is that more flows are to come.
India’s foreign portfolio investor (FPI) regime took effect this month. It streamlines and unifies the previous foreign institutional investor (FII) and qualified foreign investor (QFI) investment programmes that facilitated access to the country's capital market.
Aashish Mishra, India head of Citi’s securities and services business, told AsianInvestor that foreign investors are keen to see whether the new government will further ease foreign ownership limits.
“Foreign investors are hoping for higher limits so that they have more room to invest,” said Mishra. “The government could evaluate increasing limits for the sectors that are in most demand by FPI.”
While each FPI is allowed to invest up to 10% of its paid-up equity capital in any single company, each sector also foreign-ownership restrictions.