The Credit Suisse/Tremont Hedge Fund Index was down 1.3 percent last month as a drop in consumer confidence and concerns over rising interest rates curbed investor activity.

Overall, the indices performed relatively well, with Credit Suisse/Tremont reporting that four out of its 10 strategies posted positive returns. Dedicated short bias managers also performed strongly, with a return of 5.39 percent. They capitalized on the downward market trend to post positive gains.

But the month was largely characterized by a sagging global climate. Fears that the Federal Reserve would raise interest rates caused investors to shun emerging markets, sending returns spiraling to their steepest decline since 1998. Tremont Capital Management reported a negative performance for emerging market managers of 5.02 percent.

The Investable Hedge Fund Index, meanwhile, was down 0.69 percent net for May. But the Dedicated Short Bias Sector Invest Index held up at 5.01 percent.

Year to date, the Investable Index is at 4.96 percent. The Hedge Fund Index is returning 6.40 percent.

The Credit Suisse/Tremont Hedge Fund Index is the largest hedge fund index, with more than $400 billion in assets managed by 421 funds.