The AMP Capital Total Return Fund returned -6.50% in December, capping off a disappointing year for the fund (down -33.17% after fees).

During December the fund brought its leverage back to around 1.2x, as per its stated goals for the last quarter of 2008, negatively impacting performance. Although painful, the manager believes this will enable the fund to better exploit future opportunities. Negative performance in the energy and materials sector also contributed to the December result, although the fund did see positive returns from many of its equity and relative value strategies. Ongoing volatility and lack of demand and liquidity in credit markets remained the salient factors in market conditions.

Tibra Capital's Market Neutal Fund was down -0.51% in December, however was up +4.86% overall in 2008.

The minor fall in Australian equity markets in December (the S&P/ASX200 was down 13 points, from 3672 to 3659) saw small movements in stock prices in all sectors the fund was invested in. Following the lifting of the blanket short selling ban in November the fund recommenced shorting individual stocks, in lieu of of a short index position. Long positions on materials and short positions in industrial stocks were key drivers of the December result.

The Tibra Capital Market Neutral Fund adopts a quantitative market netural investment strategy, identifying relative price opportunities in major equity markets.

Antipodean Capital Management's Global Volatility Arbitrage Strategy ended 2008 with a return of +3.22% in December and +17.34% YTD.

The strategy, which uses a stochastic volatility model to identify investment opportunities from a basket of equity and FX assets, attributed the positive December result to buying Equity S&P500 (VIX) put options.

Antipodean's other absolute return funds, the Diversified CTA Strategy and the A$ Currency Strategy (3x), returned +2.03% and -0.04% respectively in December.

Australia's financial services regulator, ASIC, has extended the ban on covered short sales of financial stocks until March 6th, 2009. The ban, which was due to be lifted on 27th January, was extended due to renewed volatility in financial stocks in the US and Europe.

ASIC's decision will no doubt please some, and disappoint others, including those investors who have sold stock ahead of the expected lifting of the ban and in anticipation of further price weakness. However, the renewed volatility in bank and financial stock prices overseas has probably had more to do with additional and continuing bad news in the sector than the resumption of short selling.

In their statement released on 21 January, ASIC said:

'ASIC today said it would keep the ban on covered short selling of financial securities in place until Friday, 6 March 2009.

ASIC advised the market on 13 November 2008 that the current ban on covered short selling of financial securities (as defined in ASIC’s release of 13 November 2008) would remain in place until at least 27 January 2009.

This approach was consistent with many other jurisdictions, including the UK, where the Financial Services Authority (FSA) planned to lift its short selling ban on certain financial securities on 16 January 2009.

The FSA lifted its ban on 16 January 2009 and ASIC expected to then lift its ban, so as to be in line with the other major markets.

ASIC, however, noted the recent increase in volatility in financial stocks in overseas markets. ASIC is not at this stage in a position to assess if the resumption of short selling in the UK was coincidental or contributed to this volatility and if so, to what extent.

As many factors are at play in these overseas markets, ASIC needs time to examine these latest developments. ASIC will therefore, over the next few weeks, assess the markets more carefully to determine the role of short selling and aggressive or predatory practices and whether there are similar risks for Australia when the ban is lifted.

ASIC believes that in the context of the renewed volatility affecting banking stocks in many markets, including the UK and USA, this cautious approach is warranted. ASIC believes that any possible loss of market efficiency or price discovery as a result of this additional short period of review is therefore justified.

ASIC’s decision to extend the ban on covered short selling of financial securities is also in the context of a legislative framework that recognises short selling as a legitimate mechanism of price discovery and liquidity, subject to disclosure and subject to intervention by ASIC in exceptional cases.

ASIC’s intention is and remains to keep its intervention to an absolute minimum. ASIC will continue its consultations with relevant stakeholders and other regulators in Australia and overseas.

ASIC will keep the position under review, and might decide it has sufficient information to be able to lift the ban earlier than 6 March, and will make a decision for 6 March closer to that date.'

TechInvest's Intercept Capital Fund reported a gain of +0.76% in December (+12.0% in 2008), outperforming the its benchmark (the UBS Australia Bank Bill Index) which returned +0.45% over the same period (+7.6% in 2008).

With markets firmer in December, positive returns were generated from both long (Accenture Ltd, MicroStrategy Inc) and short (Dell Inc) positions, as were negative returns (FTI Consulting, Apple, Satyam). December also saw the reintroduction of short sales, with 14 stocks being shorted during the month.

The Intercept Capital Fund is a long/short (market-neutral) fund that invests in global equities, diversified across up to 40 companies.

Select Asset Management's two diversified portfolios, the Select Defensive Portfolio and the Select Growth Portfolio, both ended 2008 deep in negative territory due mainly to poor fund of hedge fund (FoHF) performance.

The Select Defensive Portfolio was down -16.2%, and the Select Growth Portfolio down -26.8%, over the past 12 months. Given the weighting of FoHF's in each portfolio, and the gap between expected and actual returns, they were a significant drag on performance - the Gottex funds for example lost between -20.1% and -37.7% on average in the last quarter of 2008. In retrospect the manager believes the impact of redemptions and poor liquidity on FoHF's was underestimated. Other underperforming strategies in the last quarter of 2008 were property, infrastructure and long and long biased equities.

The portfolios did generate positive returns from other strategies, such as volatility and managed futures, as well as gold. Strong performance in December and early January indicates there are some positive signs for 2009, although markets will remain volatile.

Two of Aurora Funds Management's funds - the Aurora Buy-Write Income Trust and the Infrastructure Buy-Write Income Trust - have outperformed their respective benchmarks in 2008, and go into 2009 ready to take advantage of the emerging opportunities in global markets.

The Buy-Write Income Trust, which returned +1.20% in December but was down -8.19% in the six months since July, outperformed the S&P/ASX200 Accumulation Index and the ASX All Ordinaries Accumulation Index by +18.64% and +21.54% respectively in the six month since July 2008. The fund remained heavily invested in cash in December, and is positioned to invest in compelling investment opportunities as they arise.

The Infrastructure Buy-Write Income Trust returned +0.60% in December but was down -1.90% since inception (December 2007), compared to the UBS Global 50/50 Infrastructure and Utility Index which returned -32.7% in the same period. The manager reported that the fund ended 2008 with most of its capital preserved, with investments in electric, gas and water utilities the key drivers of performance. This has placed the fund in a good position to take advantage of attractive investment opportunities.

Tactical Global Management Group's (TGA) GTAA Fund reported a gain of +1.30% (AUD share class) and +1.81% (USD share class) in December. The 2008 return for the fund was +0.91% (AUD) and-2.74% (USD).

Although the fund did not take any positions at a broad asset class level during December, individual strategies produced positive results. The fund's equity module benefited from the Japanese market's outperformance (up +3.8%) and short exposure to US equities, while the fixed interest module produced gains due to long US and short Japanese fixed interest exposure (partially offset by losses in short exposure to Australian fixed interest).

Going into 2009 the manager believes opportunities may present themselves in equity and fixed interest markets, due to overvalution or misprising of securities and excessive pessimism.

Wilson Asset Management's three listed investment companies - WAM Active Ltd, Wilson Investment Fund Ltd and WAM Capital Ltd - all posted positive returns in December to outperform the All Ordinaries Accumulation Index, which fell by -0.08%.

WAM Active Ltd was up +3.43% in December, which was attributed to positive returns in capital raisings trading, while at the same time the fund reduced its cash level to an average of 70%. Wilson Investment Fund Ltd was up +4.85%, and WAM Capital Ltd was up +3.09%.

The manager is expecting markets to be more orderly in 2009 and is bullish in the medium term regarding new investment opportunities, however will remain cautious given the unusual nature of the recent economic decline.

The MQ Asia Long Short Fund, managed by Macquarie Funds Group, posted a December return of +1.96%, due to gains of over +3% in the Hong Kong, Taiwanese and Korean equity markets. The fund was down -8.93% overall in 2008.

The manager noted that Australia was the only market to have a negative return in December, which offset the fund's positive performance in Asian markets. Regarding the fund's negative 2008 return, the manager attributed this more to liquidity driven price distortions, and the failure of analysts to cut estimates sufficiently for cyclical companies, rather than the general decline in equity markets. Although redemptions have been significant the fund remains profitable, and the manager belives there are an increasing number of investment avenues heading into 2009.