Rumors of my death have been greatly exaggerated

Regulators and doom merchants are shedding a tear today as the HF Global Hedge Fund Index is reported to have risen by 1.4% in May. Add this to the 1.2% in April and the industry is only 0.2% behind the game for 2008.

Easing of some volatility has helped the industry recover and the arb funds have benefited from buyouts moving closer to completion, such as Clear Channel Communications.

``Some people may have prematurely started writing obituaries for the hedge-fund business,'' said Stephen Oxley, managing director of Pacific Alternative Asset Management Co. in London, which has about $10 billion invested in hedge funds. ``I've been around long enough to have heard several times the cry that `this is the end of hedge funds as we know them'.''

Arbitrage funds, those that bet on a difference between prices, got a lift on May 22, when Clear Channel said banks had fully funded the debt portion of its transaction to be bought by firms including Bain Capital LLC and Thomas H. Lee Partners LP. Highfields Capital Management LP and Third Point LLC are among hedge funds that hold Clear Channel shares, according to filings with the U.S. Securities and Exchange Commission.Merger arbitrage funds in May had their best month since October.

Gains in the industry are reported to have been lead, not surprisingly, by the marco funds which can make bets across a wide range of investments from commodities to currencies and interest rates. These funds climbed 11 percent according to HFR data. The Global Hedge Fund Index is based on returns from more than 2,000 funds and is published with a two-day delay, according to HFR's Web site. H.

Clearly there has been some 'deaths in the family' with those funds that made the wrong bets on the mortgage market going the way of the Dodo and there will be, no doubt, some more to come.

``There's still a huge amount of uncertainty out there,'' said Sophia Brickell, an investment specialist at GAM in London, which runs $28 billion in funds of hedge funds, who expected 2008 to be a ``weed-out year'' for hedge funds.

It looks, however, like we are seeing a calmer environment for funds with most of the potentially big problems having already been removed.

``We're seeing a break from the big losses out there and that's a good start,'' said Cambiz Alikhani, who helps manage hedge-fund investments for Iveagh Asset Management, the investment arm of the Guinness family brewing fortune.

So the industry may not be totally strong and healthy, but it looks as if the hedge fund industry has, once again, shown that it is a long term player in the markets and is not going away in a hurry.