Europe

The comparison in the wealth creation chart demonstrates how well the European hedge fund markets have performed versus the local equity markets this year. The month of May continued with the good showing; the Eurekahedge European Hedge Fund Index was up 32 basis points as compared to the local equity index, which was down 17 basis points over the same period. Out of all the funds with a European mandate, around 70% of funds have netted positive returns till May 05.

	Eurekahedge European Hedge Fund Index	MSCI AC EUROPE Equity Index
Jan 05 to May 05	2.92%	-3.30%
May 05	0.32%	-0.17%

In terms of strategies, the better performers of the month were distressed debt, long/short, fixed income and relative value hedge funds. In contrast, the worst performers in May have been the directional strategies.

Strategy	May 05 (%)	YTD (%)	2004 Returns (%)	2003 Returns (%)
Convertible Arbitrage	-0.58	-2.12	-0.35	3.03
Distressed Debt	0.75	2.57	17.26	34.12
CTA/Managed Futures	-0.43	2.16	-8.16	7.44
Event Driven	-0.31	2.26	6.98	10.60
Fixed Income	0.31	1.70	8.48	16.31
Long/Short	0.41	3.42	9.54	10.54
Multi Strategy	-0.68	-0.11	14.40	12.68
Relative Value	0.14	1.60	6.11	8.48
All Strategies	0.32	2.88	8.24	10.23

The month of May continued to be a dismal month for convertible arbitrage funds, which saw a negative return of 58 basis points. Also in the red were multi-strategy, CTA and event driven funds; the latter two however remained well in the positive territory on a year-to-date basis.

North America

The performance of North American hedge funds throughout the first four months of 2005 was fairly lacklustre but considering May and early June's results, the North American hedge funds seem to have bounced back on track.

	Eurekahedge North American Hedge Fund Index	MSCI North American Equity Index
Jan 05 to May 05	-0.44%	-1.35%
May 05	1.30%	3.03%

This is due to the combined positive performance of all strategies except convertible arbitrage which continued to suffer.

Strategy	May 05 (%)	YTD (%)	2004 returns (%)	2003 returns (%)
Convertible Arbitrage	-0.24	-1.70	5.37	12.21
Distressed Debt	0.26	0.48	20.65	33.23
CTA/Managed Futures	1.71	-4.28	5.06	16.00
Event Driven	1.66	0.55	15.86	28.93
Fixed Income	0.41	1.15	11.09	16.42
Long/Short	1.81	-0.25	9.36	23.36
Macro	2.52	0.88	6.53	32.27
Multi Strategy	0.67	0.41	8.80	19.50
Relative Value	0.51	0.73	11.72	25.66
All Strategies	1.30	-0.45	9.55	21.68

CTAs recovered some lost ground in May, netting an impressive positive return of 171 basis points though it needs a couple more good months like this in order to return to positive territory.

Other impressive performers in May were event driven, macro and most interestingly, long/short funds which managed to pull off a stellar month, wiping off most of its year-to-date losses.

In short, a very good month for North American hedge funds.

Asia

2005 has been flat so far with May being no exception. The Eurekahedge Asian Hedge Fund Index posted zero returns on an overall basis which corresponded with the MSCI AC Asia Pacific Equity Index.

	Eurekahedge Asian Hedge Fund Index	MSCI AC Asia Pacific Equity Index
Jan 05 - May 05	1.94%	-3.60%
May 05	0.00%	0.00%

Going by year-to-date figures, Asian hedge funds have done well vis-à-vis its equity peers - the Eurekahedge Asian Hedge Fund Index gained 1.94% to date, whereas the MSCI AC Asia Pacific Equity Index slid by 3.6% over the same period.

The top three performers in May were relative value, distressed debt and event driven funds respectively.

Strategy	May 05 (%)	YTD (%)	2004 returns (%)	2003 returns (%)
Convertible Arbitrage	-1.68	0.27	-0.40	5.46
Distressed Debt	0.67	4.72	19.13	24.12
Event Driven	0.15	3.33	18.95	11.11
Fixed Income	0.13	2.11	12.55	13.72
Long/Short	0.08	2.11	8.93	26.88
Macro	-2.06	-3.65	0.57	57.44
Multi Strategy	-0.26	1.04	13.35	22.99
Relative Value	0.91	4.54	2.64	17.08
All Strategies	0.00	1.94	9.72	25.93

The returns from distressed debt funds have been largely attributed to the dollar's weakness, which has resulted in tightened credit spreads for high yield issues, thus benefiting distressed debt funds. As with most strategies, Asia Pacific distressed debt funds still see low volumes on a global scale, and thus offers systematic inefficiencies that will generate consistent returns. Event-driven funds, which often capitalise on the same opportunities as distressed debt such as capital restructurings, also continued their pace for the year, up 3.33% for the last five months. Event-driven funds have generally benefited from increased public offerings, secondary placements and block trades in the region.

Macro, convertible arbitrage and multi-strategy funds were the worst performers for the month. These directional strategies seem to have faced difficulty in the flat markets with low volatilities but long/short equities managed to pull it off, posting marginal positive returns for May.

Overall, 53% of all Asian strategy funds reported positive returns for May and 70% were in positive territory on a year-to-date (Jan 00 to May 05) basis.

Latin America - Onshore

The Latin American onshore hedge funds ended the month with a very impressive gain of 123 basis points.

	Eurekahedge Latin American Hedge Fund Index (Onshore)	Eurekahedge Latin American Hedge Fund Index(Off shore)	MSCI Latin America Equity Index
Jan 05 - May 05	4.78%	2.39%	4.26%
May 05	1.23%	0.27%	6.36%

The major drivers of the growth for May 05 have been primarily fixed income and multi-strategy funds, both netting sterling returns of 151 and 172 basis points respectively. Long/short funds also did well by gaining 96 basis points. Relative value funds made an impressive comeback, returning to the black with a positive return of 65 basis points.

Strategy	May 05 (%)	YTD (%)	2004 Returns (%)	2003 Returns (%)
CTA/Managed Futures	-6.25	-5.26	24.37	20.10
Fixed Income	1.51	7.22	15.60	39.25
Long/Short	0.96	2.22	35.79	55.83
Macro	0.13	2.72	6.70	9.82
Multi Strategy	1.72	6.18	19.76	35.86
Relative Value	0.65	-3.47	40.03	53.14
All Strategies	1.23	4.78	22.41	36.68

CTAs were the worst performers of the lot and have been in the red since the beginning of the year.

On the wealth creation front, the Eurekahedge Latin American Hedge Fund Index (Onshore) beat the MSCI Latin American Equity Index by 52 basis points for the year till May 05. However it couldn't keep up with the pace of the booming Latin American equity markets in May 05.

Notwithstanding, May 05 saw a generally good performance by the onshore LATAM hedge funds.

Latin America - Offshore

Continuing with the broad trend for the year, the month of May saw largely flat returns for the offshore managers. The only impressive gainer for the month was event driven hedge funds, netting a positive 228 basis point return.

Strategy	May 05 (%)	YTD (%)	2004 Returns (%)	2003 Returns (%)
Distressed Debt	0.08	2.85	18.29	27.37
Event Driven	2.28	11.65	22.57	38.55
Fixed Income	0.28	3.11	11.22	23.85
Long/Short	0.22	1.93	17.33	53.29
Macro	-0.03	-0.10	6.59	40.02
Multi Strategy	0.43	2.48	11.68	25.90
All Strategies	0.27	2.39	15.21	36.49

All other strategies except macro remained in the positive territory in May.

Despite a satisfactory performance in May, the offshore managers have a lot of catching up to do to bring themselves up on par with its onshore counterparts.