As Australia's financial year draws to a close, so to it would seem does the outlook for any extension of quantitative easing in the USA; the resources boom in Australia; the Aussie dollar at parity or above; and possibly China's growth trajectory.

Over the past two months the uncertainties created as a result of these will still result in a positive year for Australian equity markets, even if some of the gloss has been taken off the top as rationality returned.

For the record it looks as if the ASX 200 will record one of its better years in the 12 months to June, up nearly 18%, although the second half, since January will struggle to show a gain of 4%.

A comment from one of the fund managers we recently talked to focused on the degree of involvement that politicians have had in global markets over the past three or four years.

Politically it also ends one of the more turbulent years (or three) in Australian politics, although local politicians have had less of an impact on the market than their overseas counterparts.

Looking forward there are significant changes on the horizon for the financial services industry, most notably the introduction of the FOFA legislation relating to the provision of financial advice to retail investors. While it is often considered that absolute return funds and retail investors are, or should be, like oil and water, the reality is that approximately 50% of the funds in our database are open to investment by retail investors, and slightly more than that have minimum investments of less than $50,000 and daily liquidity.

Elsewhere we believe the absolute return industry is gaining considerable traction, while at the same time maturing. AIMA, or the Alternative Investment Management Association has recently indicated that its Australian arm, under the leadership of industry veteran Paul Chadwick is taking a more proactive and outward looking approach.  At the same time the US Based Hedge Fund Association or HFA, has recently established an Australian chapter and is being represented by Adriana Kostov.

The Hedge Fund Association, is a US founded, International not-for-profit industry trade and nonpartisan lobbying organisation devoted to advancing transparency, development and trust in alternative investments, and is made up of hedge funds, funds of funds, family offices, high net worth individuals and service providers.

There is no doubt that competition between the two organisations will benefit all industry participants whether they be service providers, fund managers or investors. For too long the industry has been seen as a collection of boutiques without a single voice, and raising its profile is a step in the right direction.

Performance and News Updates on www.fundmonitors.com this week:

Auscap Long Short Australian Equities Fund returned -4.05% during May and 10.51% for the last six months. This compares with the benchmark return of 0.24%. Average gross capital employed by the Fund was 162.3% long and 31.2% short. Average net exposure over the month was +131.1%. At the end of the month the Fund had 25 long positions and 14 short positions.

The Totus Alpha Fund returned 1.84% during May and one year rolling returns are 17.34%. Since inception the fund has averaged returns of +1.45% (net) during months in which the ASX was up and +1.63% (net) during months in which the ASX was down. The fund's short positions in second and third tier mining and mining services stocks continued to deliver strong returns during May while the (more) recently added domestic cyclical shorts also contributed nicely to performance.

BlackRock Australian Equity Market Neutral Fund returned -2.12% during May and 6.09% for the preceding twelve months. Fund performance was hurt by the rebound in small/mid cap resources which had been sold down heavily in April, by the outperformance of USD exposed stocks, and by several significant stock specific profit warnings.

The Pengana Australian Equities Market Neutral Fund returned -1.7% during May bringing its since inception (Sept 2008) return to 8.27% pa. Earnings Revisions was the best performing investment theme in the Fund's model followed by Momentum and Value, while Quality detracted from performance for the month.

AUI Wingate Global Equity Fund returned 8.95% over May and 23.81% over the preceding twelve months. Performance was supported by the weaker Australian dollar as the portfolio's assets are unhedged. Successful stock selection contributed to relative outperformance notwithstanding the Fund's lower than average equity weight.

Fund Reviews were also completed on Insync Global Titans Fund and BlackRock Australian Equity Market Neutral Fund.

Now for something completely different, this week one of Rowan Atkinson's characters visits the bank.

On that note I wish you a happy and healthy weekend and look forward to a prosperous new financial year starting on Monday.

Regards,

Chris
CEO, AUSTRALIAN FUND MONITORS

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