Hedge funds returned 4.06% in May, the largest monthly gains since February 2000, according to the Credit Suisse/Tremont Hedge Fund Index. Year-to-date, hedge funds tracked by the index have risen an average of 6.72%.

In the month, emerging markets funds were the strongest performers, delivering 6.96%. “The emerging markets sector has experienced a significant turnaround over the last three months, as risk appetite seems to be returning to the markets,” said Ovlicer Schupp, president of Credit Suisse Index. “Investors are encouraged by positive signs of global growth and risking commodities prices.”

Year-to-date, emerging markets hedge funds are up 12.43%. Convertible arbitrage also did well in May, rising 5.81%; the category is up 19.12% YTD.