The Van Global Hedge Fund Index, a benchmark of hedge fund performance run by Van Hedge Fund Advisors International, rose 3.7% in May, net of fees, up from a 2.6% gain in April, according to a preliminary report. That brings the index up 7% for 2003, marking its best calendar-year start since 1999.

Within that universe, distressed securities and emerging markets have been among the top hedge fund strategies this year. Aggressive growth funds, however, showed the strongest returns in May.

"Hedge funds enjoyed another month of benign markets in May, and we’re pleased to see that 88% of the net returns submitted to us so far are positive," said George Van, the company’s founder and chairman. "[They] have shown themselves to be ‘all-weather’ investments, generating gains in the bull market of the late-90s as well as in the bear market of 2000, 2001 and 2002."

Despite solid returns, the index failed to keep pace with the broader market last month ,as the S&P 500 index rose 5.5% and the Nasdaq Composite jumped 9%. Short positions likely contributed to smaller gains, the report said.

The data is based on early returns from roughly 280 hedge funds worldwide. Final May returns will be released in mid June, based on a significantly larger pool of hedge funds.

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