CNBC – Hedge funds posted their best monthly performance in a decade in May, taking advantage of rallying stock markets and distressed opportunities across the board, according to the latest numbers from the Absolute Return Composite of hedge fund indices.The industry has been increasingly under the microscope by Washington and investors alike since the second half of last year. On top of registering their worst performance ever in 2008, with the average fund down 19 percent for the year, the $50 billion Madoff fraud delivered a severe blow to the already suffering industry and gave rise to a huge wave of redemptions.

But this year has been different. On average, hedge funds gained 3.1 percent over May, bumping up year-to-date gains across the $1.33 trillion industry to about  6.1 percent.

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