Blue Fin Capital's Managed Commodities Account ended 2008 on a positive note with a return of +1.78% in December, bringing its 2008 return to +11.43%.

Positive returns were generated through the fund's strategies in grains, softs and metals, although these were partially offset by negative returns in energies. The fund however underperformed against its benchmarks, the CSFB Managed Futures and Barclays Systematic Index, which returned 15.59% and 16.10% respectively in 2008 (to November). The Managed Commodities Account employs short term trading approaches in North American commodities futures markets, combining quantitative trading strategies with a robust risk management framework.

Attunga's three funds all reported negative returns for December - the Enviro Opportunities Fund returned -8.53% (-6.75% YTD), the Power & Enviro (Offshore) Fund -5.81% (-8.19%) and the Agricultural Trading Fund -2.05% (+22.42%).

Attunga blamed the lack of weather stimulus for high electricity prices at the start of summer as a significant driver of the December results. The commissioning of new power stations, as well as fewer active traders in the market over December also affected returns. For the Agricultural Trading Fund, lower crude oil prices and losses on US wheat spreads offset gains on volatility spreads in other commodities.

The Austral Equity Fund recorded a return of +0.45% in December, bringing its 2008 return to +1.30% and its 2009 financial year return to +2.90%.

The fund's positive return came amidst less volatile market conditions in December, although overall liquidity in equity markets was low. As a result the fund's trading activity was relatively low, the fund's return being mainly attributed to existing interest rate securities positions. The Austral Equity Fund is an event driven fund which invests mainly in Australian companies that are, or may be, involved in special situations or corporate events.

Australia's Sydney Morning Herald (SMH) has reported that the Westpac controlled BT Investment Management wrote to investors before Christmas advising they were freezing redemptions on its $1.2bn Global Return Fund.

The SMH article cites BT believing that "unstable market conditions ... assets cannot be realised at prices that would be obtained in a stable market."

Management of the Global Return Fund was apparently outsourced to Grosvenor Capital Management in Chicago who are claimed to manage US$23bn. Grosvenor had taken action to segregate a portion of the less liquid assets.... and as a result are not currently available to meet redemptions in the fund. However, Grosvenor itself has not suspended redemptions from its own master fund.

Australian based Fund of Funds HFA Asset Management has suspended redemptions from a number of its underlying funds including the HFA Diversified Investment Fund, and the HFA Octane and Octane Series 2 Fund, effective December 22nd.

Citing deteriorating liquidity in the underlying funds in which it invests, HFA also announced limited liquidity in their US based Lighthouse Diversified Fund, by establishing a special purpose vehicle (commonly referred to as a "side pocket") to hold and isolate the redemptions in illiquid investments until such time as they are liquidated.

HFA are not the first, and are unlikely to be the last Fund of Funds to halt or limit redemptions due to lack of liquidity in underlying funds. In October Everest Babcock and Brown announced that it would freeze redemptions in their Income Fund, and earlier this month Macquarie announced a halt to redemptions in their Equinox Series of funds. Prior to this there were wide ranging redemption freezes in many Australian based mortgage funds.

To date single manager Australian Funds have avoided freezing redemptions in spite of being subjected to significant and widespread redemptions from investors, particularly Fund of Funds, who in turn have been subjected to a wave of redemptions from their own investors. However, the redemptions to date are having a domino effect as investors redeem from otherwise well performing funds due to the lack of liquidity in others. The liquidity issues are also primarily based on the larger overseas managers, although the flow on effect has certainly reached Australian funds and their investors.

With the S&P500 and the ASX both down around 7%, and energy and commodities in disarray, it seems strange to be saying that November saw some improvement and signs of stability. With 70% of funds reporting to date, the average November return of Absolute Return funds in AFM’s database was minus 2.81%.

The debate in the media continues as to whether Absolute Return Funds as a whole should be reporting negative results, but a more careful analysis shows that strategy selection has determined investors’ returns in 2008.

Once again the best performing strategies were non-equity based (i.e. Global Macro, Commodities, Currencies and Managed Futures). Equity based strategies suffered but still on average outperformed the underlying equity benchmarks with the S&P/ASX200 Accumulation Index ending down 6.2% for the month, the S&P500 Total Return Index down 7.18%.

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The Prime Value Growth Fund (PVGF) recorded a loss of -4.9% in November, bringing its YTD performance to -33.1%. The Prime Value Imputation Fund (PVIF) also posted a loss of -8.3% in November, making its YTD performance -41.2%. Both funds invest in a long portfolio of predominantly Australian listed equities.

The PVGF outperformed the S&P/ASX300 Index (-6.3% in November), which Prime Value attributed to the fund's underweight positions in Australian financial and consumer discretionary stocks, while at the same time holding cash in negative market conditions. Although optimistic about investment prospects in 2009, the fund will remain cautious in the near term.

The PVIF underperformed the S&P/ASX300 Index, mostly due to the fund's overweight position to Australian industrial stocks, although this was somewhat offset by the fund's cash holding.

The Platypus Asian Equities Fund was down -0.14% in November, while the Platypus Australian Long/Short Fund was up +0.21% (both in USD). The respective YTD returns for these funds are now +2.31% and -6.53%.

The Asian Equities Fund, a systematic long/short Asian equities fund, cites the fund's overall net short position over recent months as the main driver of performance. The fund remains lightly invested across countries.

The Australian Long/Short Fund, a systematic long/short Australian equities fund, noted that the local currency return for the month was in fact +0.41%. Overall the positive November result was attributed to the strong performance of the fund's market neutral portfolio, which returned +4.43% on an attributed basis.

Cadence Capital Limited was down -6.38% after fees in November, bringing its YTD performance to -34.16%.

Although outperforming the All Ordinaries Accumulation Index (-7.2%) and the Small Ordinaries Accumulation Index (-9.6%) in November, the fund recorded a negative result to follow on from negative results in October and September. During November the fund significantly decreased their net exposure to the market from October (47.7% to 28.4%). Cadence Capital Limited is an Australian long/short equity fund, with a long bias towards small- and medium-capitalisation listed entities.

The MQ Asia Long Short Fund returned +0.08% in November, and is now at -10.68% for the past 12 months. This is compared to the Eurekahedge Asia Long Short Index which was down -23.72% over the same period.

Like many other funds, the fund reported an increased level of redemptions during November, and during December has been actively managing these outflows. MQ believes there are several reasons for the fund to be optimistic about the future, including the decreased distortions in liquidity markets, the availability of more accurate macro research reports and the fact that the fund has minimal directional market exposure.