Naos Asset Management's Absoluite Return Fund remains largely invested in cash (77.8%) and outperformed the manager's Small Company Fund in December 2008. The Absolute Return Fund generated a positive return of 0.83% for the month while the Small Company Fund lost 1.32%. Over the whole year the difference is even more stark with the Absolute Return Fund losing 25.96% while the Small Companies Fund is down 63.28%.

The manager reports that small company stocks are being hit hard by illiquidity and the deleveraging process but believes that the companies held in the portfolio have sound medium term fundamentals and remain over-sold/under-valued.

The investment objective for both funds is to outperform the UBS Bank Bill Index over a rolling three year period regardless of market environment.

The Bennelong Long Short Equity Market Neutral Fund returned +0.49% in December after fees, taking 2008 returns to 9.36%, and an annualised return over 6 years since 2003 to 22.10%.

The fund outperformed the S&P/ASX200 in December, which recorded its 4th consecutive negative month, however conservative stock selection strategies and individual stock issues weighed down the fund's return. Bennelong welcomed the reduction in market volatility in December, however remains cautious in outlook and will remain defensive in the short term.

Bennelong was adversely affected by the ASIC ban on short selling in September, losing 8.57% in that month alone, before readjusting the portfolio and recovering over the balance of the year. The manager has performed consistently over the past six years employing a pairs trading strategy of top 100 ASX listed stocks to give investors an annualied return of 22.10%.

The Commodity Strategies Long/Short Programme reported a gain of +0.65% in December, and +22.28% in 2008. The Long Only Programme lost -0.13% in December but maintained a positive return of +10.47% for 2008.

Positive performance in December in the Long/Short Programme was attributed to strong returns on metals and industrial stocks, which were somewhat offset by losses in agricultural and grains stocks. The negative return in the Long Only Programme resulted from negative returns in metals stocks.

Both funds significantly outperformed their benchmarks in December - the Long/Short Programme outperformed its cash benchmark while the Long Only Programme outperformed to RJ CRB Index by +6.15%.

Funds managed by K2 Asset Management recovered some ground in December but still finished the year in negative territory. Best in the month was the Peak Asian Absolute Return Fund which gained 5.89% but remains 34.25% lower than the start of 2008.

Similar results were recorded for their other three funds. The Asian Absolute Return Fund was up 5.17% for the month but down 28.35% for the year, the Select International fund gained 5.09% for the month but lost 22.44% during the year, while the Australian Absolute Return Fund had the lowest result in December of 3.37% but over the year has the best result with a loss of 18.61%.

The manager believes that credit markets are slowly being repaired which will see equities become the most attractive asset class. On the back of this view they are increasing the net exposure of both the International and Asian funds.

None of Platinum Asset Management's absolute return funds reported negative performance in December with their Asia Fund recording the strongest gain of 4.4 per cent, while the International Health Care Fund was their worst performer with a 0% return.

The International Technology Fund gained 3.5% in the month while the International Brands Fund was up 3.0%. The International Brands Fund invests in companies around the world with well-recognised consumer brands as the manager believes that globalisation will lead to the emergence of "mega-brands".

Platinum is Australia's largest absolute return manager with almost $14billion in total funds under management.

The Wallace Australia Opportunities Fund (WAOF) returned +1.71% in December, bringing its 2008 return to +48.9%. This fund has now produced positive returns for every month since March 2008.

The fund's long/short strategy returned +0.937% for December, mainly attributed to net short positions in financial and consumer staples stocks, and a small net long position in industrials. This was partially offset by the fund's net long exposure in material stocks. The event driven strategy returned +0.777% in December, with the fund taking advantage of short term trading opportunities.

The Prime Value Imputation Fund (PVIF) recorded a loss of -1.7% in December, and was down -40.6% for 2008, while the Prime Value Growth Fund (PVGF) returned -31.5% in 2008 (+1.1% in December).

Both funds benefited from underweight positions in financial and telecommunications stocks, and overweight positions in industrial stocks, however individual stock selection in the PVIF contributed to a negative overall return. Prime remains cautious in the short term, although there have been some recent positive signs (falling volatility, small data improvements and central bank and government interventions), and believe good opportunities will present themselves in the coming months.

Regal's Tasman fund lost 2.9% in December and their Amazon fund was down 0.6% for the month. Over 2008 the Tasman fund lost 9.8% and the Amazon fund lost 8.18%.

The manager's report says that some short positions in the industrial sector did not work out, costing the funds 2 percentage points. Also impacting returns was Telstra's decision to adopt a comatiove stance with the federal government over the national broadband network.

Both the Amazon and Tasman funds aim to maximise returns with only moderate risk and low correlation to euity markets.

The Excalibur Absolute Return Fund returned +3.74% in December, ending 2008 with a return of +12.23% and a worst month of -0.94%.

Since inception (June 2006) the fund has returned +66.59%, compared to the S&P 500 which returned -34.42% in the same period. Due to low interest rates worldwide, market uncertainty and a recessionary global economic environment Excalibur is expecting significant AUM growth in 2009 due to increased interest in the fund. The Excalibur Absolute Return fund specialises in trading FX products, with a flexibility in its mandates to enable it to profit in all market conditions.

The Elstree Enhanced Income Fund returned -5.62% in December, reducing its 2008 return to -36.4%. The December return underperformed the All Ordinaries Accumulation Index (0%) and the UBS All Maturities Bond Index (-1.2%).

Elstree attributed December's disappointing result to a decline in price in an AXA hybrid security, in which the fund has a 10% holding, due to forced liquidation. The fund was also negatively affected by an early redemption of the Allco Alleasing hybrid at a discounted price.

In their annual credit risk analysis, Elstree noted that the averaged corporation is currently not highly geared, and in general leverage has not increased this decade.