Listed investment company Ellerston GEMS is expected to be delisted after a shareholder campaign. EGF listed last year at $2.50 per unit and at the end of June had a net asset value (NAV) of around $2.40 per unit but, like many listed investment trusts, has been trading at a discount, closing yesterday at $1.78.

Shareholder John Dalley, who owns 1.35 per cent of the trust, sent letters to other unit holders seeking support for his calls to wind up the fund saying that he expects they would be able to realise about $2.33 per unit if it occurred now. It is believed that he succeeded in getting the required additional 99 unit holders to support his motion.

Challenger Financial Services is added to its range of boutique fund managers, buying stakes in a new fixed interest manager and a hedge fund manager. Challenger will own 30 per cent of a fixed interest boutique that will launch later this year and has bought 27.5 per cent of the Australian equities hedge fund manager WaveStone Capital.

WaveStone was established in September 2006. Challenger will provide the manager with seeding for a new offshore absolute return fund based in the Cayman Islands which will push WaveStone's total funds under management past $100 million.

Platinum Asset Management has seen its funds under management fall by $6.2 billion, or almost 30 per cent, over the year to the end of June 2008. The fund manager cites volatility in global markets and world financial conditions generally as the cause for a drop in its net profit after tax from $186.1 million in 2007 to $161.9 million for 2008.

Performance fees generated by the company's funds fell 23.8 per cent to $28.7 million while management fees fell in line with the lower total funds under management. The Chairman's report also warns that it is possible that no performance fees will be earned over the next six months. Performance fees are calculated over the calendar year and, although the funds are outperforming their benchmarks, the performance of all funds over the first six months of the year is -9%.

Absolute return fund manager HFA Holdings has recorded net inflows of $535.41 million over the 2007/08 financial year at the same time as long only fund manager Perpetual announced that it had net outflows of $3.5 billion.

Increased volatility in financial markets has investors turning from traditional fund managers in favour of alternative investments which have a stronger focus on capital preservation. Recent analysis by Australian Fund Monitors found that, on average, absolute return funds lost 3.64 per cent over the first half of 2008, however the ASX fell 21.56 per cent and the S&P 500 was down 14.72 per cent.

HFA Holdings reported a 73 per cent increase in net profit after tax to $35.2 million for the year to June 2008. The result was largely due to its purchase of US-based Lighthouse Investment Partners which boosted management fee income although performance fees were down in line with market conditions.

Australia's Absolute Return and Hedge Fund managers significantly outperformed both local and overseas equity markets in the first half of 2008, with over 80% achieving better returns than the ASX200, and 36% achieving a positive return after fees.

The average cumulative return of all Australian Hedge funds in the six months to June 2008 was -3.64%. Collectively on average they outperformed the ASX200 benchmark by almost 18%.

For a full copy of the report, which covers distribution of returns by Manager type, strategy, asset class, monthly volatility, investor type, fund domicile and geographic mandate, download the file below.

ATTACHED FILESAbsolute Return & Hedge Fund Performance Review YTD June 2008 (pdf format)

Excalibur's FX Absolute Return fund posted a positive result of +0.21% in July 2008, bringing 2008 YTD performance to +10.21%.

The manager's monthly report noted a difficult month for most funds, with the AUD/US hitting $0.9850, the highest level since the A$ was floated in 1984, and the AUD/Yen reaching a high of 104.50. The fund's open positions were on average 1.55x leveraged and the manager reported further fund inflows from European and Asian institutions for August.

Excalibur Funds Management is a Sydney based absolute return manager, following a 50/50 Systematic/Discretionary trading approach. The wholesale offshore Currency / Asian focused fund was established in the BVI in July 2006, and has a compound average annual return of over 26% with low correlation to other markets including the S&P.

Australia's Corporate regulator, ASIC has flagged a wide ranging plan to improve corporate governance and compliance in a number of areas, including suspected market manipulation, rating agencies' conflicts of interest, and Listed Investment Schemes. At the same time ASIC has flagged it will closely monitor company briefings given to analysts to ensure they do not breach disclosure laws.

All these issues are already covered elsewhere by ASIC, but the announcement will give some much needed focus to areas which in the past have avoided much scrutiny. Although recent market turmoil has resulted in the announcement, the response is both welcome and overdue, particularly the spotlight which will be shone on the role of Credit Rating Agencies and the glaring conflicts of interest which have been allowed to flourish with such disastrous results over the past 12 months.

Regal Funds Management's Amazon Market Neutral Fund recorded a fall of 7.63 per cent in July, however healthy returns over the last few months still leave a positive return of 6.22 per cent for the year so far. By comparison the ASX200 lost 4.6 per cent in July and is down 10.3 per cent over the last six months.

Most disappointing for the manager was mis-timing adjustments to the portfolio, including cutting short positions in ANZ and NAB only days before they both announced significant increases in their bad debt provisions which saw both stocks lose around 20 per cent.

Amazon, a Cayman based Market Neutral fund open to wholesale investors only, returned +32% in 2007, and 42% in 2006 for an annualised return post all fees of 34.43% since inception in September 2005. Investing mainly in Australia, with some opportunistic positions mainly in Europe, Amazon does not invest in emerging markets.

Regal Funds Management was established by Andrew King in January 2004 following experience with local boutique manager Paradice Investment Management.

A slump in new housing loans has added to the case for a reduction in official interest rates when the Reserve Bank of Australia meets again at the beginning of September. Over the first six months of this year the volume of new loans has fallen by 25 per cent, the worst result since 1989. The highest mortgage rates in 12 years have seen the level of home loans fall for five consecutive months, with owner occupied loans down 29.5 per cent and investment loans 32 per cent lower than in June last year.

Commodity prices fell sharply yesterday, dragging high profile resources stocks down with them. Analysts say that investors are deserting the sector as fears grow that the boom is over on the back of news that manufacturing in China contracted during July for the first time since 2005. Oil dropped below $US120 a barrel on Monday night, copper is at its lowest level for the last six months while gold and silver have both fallen to six-week lows. Shares in BHP Billiton fell to their lowest level in four months and Rio Tinto saw its shares fall to their lowest in five months. Also fueling the slide were rumours that a hedge fund had started to liquidate its commodity investments.