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In May 2025, global financial markets posted strong gains, continuing the momentum from the second half of April. This rally was driven by progress and further developments in trade and tariff negotiations, which supported strong equity market performance. Technology led equity market gains on strong earnings and an overall improvement in risk sentiment, as prospects for global economic growth strengthened compared to the previous month. Germany and Japan led regional equity market gains. Despite moderating inflation, interest rates rose, while market volatility declined. The US dollar weakened against most major currencies. In commodities, notable gains were seen in oil, natural gas, platinum, hogs, and wheat.

Hedge funds gained for the month, with the HFRX Absolute Return Index gaining +0.76% and the HFRX Global Hedge Fund Index gaining +1.17% in May.

HFRX Equity Hedge Index gained +2.63% for the month from a large gain in fundamental growth strategies along with market neutral and fundamental value strategies. The HFRX Fundamental Growth Index gained +5.62% from gains in exposure to small-cap US & European equities. The HFRX Equity Market Neutral Index gained +1.27% from gains in mean reverting, factor-based strategies. The HFRX Fundamental Value Index gained +1.18% from gains concentrated in large-cap US & European equities.

HFRX Event Driven Index gained +1.09% in May from gains in merger arbitrage strategies and special situations managers. The HFRX Merger Arbitrage Index gained +1.42% for the month as global equity markets saw decreased volatility and strong gains in May. The HFRX Special Situations Index gained +1.07% from gains in exposure to global, catalyst-driven fundamental value equities.

HFRX Relative Value Arbitrage Index gained +0.61% for the month led by gains in convertible arbitrage strategies and multi-strategy managers.  The HFRX Fixed Income Convertible Arbitrage Index gained +2.05% as volatility decreased through the month of May. The HFRX RV: Multi-Strategy Index gained +0.47% as interest rates rose in May.

HFRX Macro/CTA Index declined -0.44% in May from declines in systematic trend-following managers. The HFRX Macro Systematic/CTA Index declined -1.39% as the US Dollar weakened against most currencies. Commodities saw a mixed-to-positive performance, with Lean Hogs, Platinum, and Oil leading commodity gains. Coffee, Corn, and Gold led commodity declines.

Comments reference performance figures as of May 30, 2025