Hedge funds lost money in May but outperformed the traditional equity-market benchmarks, the Hennessee Group said on Tuesday.

The group's Hennessee Hedge Fund Index declined 2.99% last month.

Also in May the Nasdaq Composite Index fell 8.29%; the S&P 500 index, 8.20%, and the Dow Jones industrial average, 7.92%.

May was not a reassuring month for investors, starting with the mysterious May 6 "flash crash." European sovereign debt woes, the oil spill in the Gulf of Mexico and North Korean belligerence helped spark a broad selloff and a subsequent flight to U.S. Treasurys.

"I cannot remember a time when there have been so many potential global crises happening at the same time," said Charles Gradante, a co-founder of the Hennessee Group, an adviser to investors regarding hedge funds.

Factoring in domestic concerns surrounding market regulation, massive national debt, the likelihood that taxes will rise and the petering out of the federal stimulus, "there are many things keeping hedge fund managers awake at night," Gradante said.

That said, hedge funds' primary role as downside protection in a portfolio seemed to have been fulfilled, to a degree at least.

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