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Hedge funds outperform equities in May

Data: eVestment; Table: Axios Visuals

Hedge fund returns fell last month after four straight months of positive results to start the year, but managed to outperform the broader U.S. stock market — posting much slimmer losses.

Be smart: The data from market research firm eVestment found nearly all hedge fund categories outperformed the S&P 500 in May. Equity strategies had the worst performance among primary markets hedge funds, but still outpaced the S&P by more than 400 basis points, with quantitative directional strategies delivering overall positive returns for clients during the month.

The big picture: Hedge funds have seen significant redemptions and declining popularity as they have dragged well behind the overall market's returns for more than a decade. Year-to-date, hedge funds still trail the S&P, but May's stock market swoon showed hedge funds remain a solid alternative for investors to offset risk and may help redeem the industry.

Reality check: Hedge funds were comparable to a benchmark fund of 50% global stocks and 50% global bonds in reducing losses during the month, measured by the mix of MSCI's all-world stock index and Citi's world government bond index.

  • Investment in such strategies is also generally significantly less expensive than hedge funds.

Go deeper: The hedge fund moment is over