MM&E Capital has reported a quiet month with both of their Investment Trusts, No. 1 and 2, returning a positive result of 0.35% for August bringing the 2008 YTD performance to 1.59% for Trust No. 1 and to 0.76% for Trust No. 2.

Trust No. 1 is MM&E Capital's oldest fund with an inception date of July 2002 and approximately A$83.9 million under management. Trust No. 2 began investing in July 2004 and currently has A$12.6 million under management. Trust No. 1 is closed to new investors while Trust No. 2 is currently open with a minimum investment amount of A$25,000. Both Trusts aim to deliver returns of 15% p.a. (gross of fees) with volatility of 5% p.a. or less regardless of movement in the equity market index. Trust No. 2 is managed in a near identical fashion to Trust No. 1 and neither Trust employs leverage.

MM&E Capital is a dedicated Australian event driven hedge fund manager which employs strategies in takeover and demerger arbitrage, convertible securities arbitrage, capital raisings (i.e. IPOs, Placements, Sell Downs and Rights Issues) and Buy/Write dividend stripping.

Tibra Capital's Australian Market Neutral Fund has posted its first negative month for July (-7.32%) since inception in October 2007 to take 2008 YTD performance to +26.89%.

The manager noted in their monthly investor newsletter that the portfolio had previously benefited from a thematic long bias to energy stocks, and the sharp sell off in oil led to a fall of almost 16% in the energy sector, and a fall of 6% on the ASX200.  They also pointed to continued reduced option volumes across all sectors, reflecting a continued lack of confidence in an oscillating but directionless broader market.

Tibra Capital Management is the funds management division of Tibra Capital, a diversified financial services company with global operations.  The fund has an investment universe of the ASX200 index, and aims to deliver net absolute returns of 18-22% pa regardless of market conditions.

Redwood Capital's Apeiron Global Macro Fund has reported a positive result for July 2008, returning 1.53% to take YTD 2008 performance to +7.07% and a 12 month rolling return of +14.73%.

Redwood noted in their monthly report that they had benefited from being short oil and the Australian dollar during the month, while being short equities and bonds had both detracted from performance. The manager also noted economic slowdown spreading throughout the world, and the potential for geopolitical risks in both China and the Middle East to potentially lead to some counter cyclical market moves.

The Apeiron Global Macro Fund uses directional strategies in futures and FX markets to implement investment themes. The fund was formerly called Solaris Global Macro, and returned 20.79% in calendar 2007. Redwood Capital has a total of A$36.5m in funds under management.

As speculated late last week, Ellerston GEMS Fund will put a proposal to its unit holders next month recommending that the fund be delisted from the sharemarket. In a press release the company says that shareholders will be able to progressively redeem units at a price equal to a 7.5 per cent discount to the then NAV. Ellerston Capital's chief executive officer, Glenn Poswell, said that the move is a win-win for unit holders to unlock value now compared to the price the market has been prepared to trade their units.

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.