Eclectic Capital Management, a Melbourne based Equity Long/Short manager established in 1999 has closed as at the end of September,and returned all funds to investors.

Eclectic's performance to the end of September was -4.2% YTD, well above the benchmark of the ASX200, and broadly in line with the AFM Hedge Fund Index. However, Eclectic's August performance report noted that "investing in this market is like driving a land cruiser down the Nullabor and hitting rumble strips. You can get through but it's not much fun, and it's not good on the nerves."

AMP Capital's Total Return Fund, a leveraged, Multi Strategy, Global Fund of Funds with $979 million in funds under management, returned -13.21% in October, bringing 2008 YTD performance to -18.61%.

The Manager reported that the majority of underlying strategies in the fund experienced losses in October due in part to continued liquidation occurring in hedge funds globally. In particular managers in the leveraged loan market, distressed, special situations and macro strategies all contributed to the losses. On the positive side were commodity strategies and some sector specialist funds.

AMP reported they were reducing exposures to various strategies to lower risk, whilst also noting that they have adjusted their Australian dollar hedge position to act as a buffer against negative manager performance.

The BlackRock Asset Allocation Alpha Fund returned 8.17% to investors in October, continuing what has been a successful year to date, returning over 30%.

The fund which was formerly known as the Merrill Lynch Asset Allocation Alpha Fund, noted positive influences on performance included bonds/cash, currencies and equities, reflecting the long US large cap versus US small cap, and long US growth versus US value.

Looking forward, the manager noted that there is now a risk that the global economy faces deflation in the next 12 to 24 months on the heels of a severe global recession. They also noted that equity markets usually reached their lows 3 to 6 months before the end of the recession, and with their negative view in that regard, feel that it is likely to be still too early to buy.

The average October return of Absolute Return funds in AFM's database stands at negative 4.32% with 61% of funds having reported to date. Of all funds so far reported 31% have achieved positive returns while 86% have outperformed the S&P/ASX200 Accumulation Index during October.

The non equity based strategies of Global Macro, Commodities, Currencies and Managed Futures averaged positive returns for October, while the equity based strategy of Equity Market Neutral also averaged a small positive gain. On a year-to-date basis Commodities remains the best performing strategy on average.

At an individual fund level, the best result reported to date has been Argus Capital Management Pty Limited with their Dynamic Multi-Strategy Program returning 11.77% in commodities. Fortitude Capital continues it's unequalled record of positive returns every month this year achieving 3.12% for October in it Absolute Return Trust using an equity market neutral strategy.

Blue Fin Capital, an Australian quantitative investment manager specialising in trading spot foreign exchange and commodity futures markets, has reported a positive return of +1.12% for October, bringing year-to-date returns to 10.62%.

Performance attribution for October was positive 0.05%for soft commodities, +1.62% for metals and +0.24% for energy. Grains lost -0.79%.

Blue Fin Capital's managed commodities account was established in April 2007.

The Reserve Bank of Australia released the minutes of its most recent board meeting held on November 4, at which they handed down the decision to cut official rates by 0.75% to 5.25%.

The five pages of minutes made for gloomy reading, with hardly any positive indicators noted either in Australia or overseas. As such it was hardly any wonder that the board cut rates by 75 bps -- maybe the real surprise was that they didn't go further.

All eyes will now be on the Reserve's next meeting due to be held on Tuesday, December 2. As the Board does not usually meet in January, they will need to make a decision then to carry through Christmas and the January holiday period.

No one in the market will be surprised to see a further 75 bps, or even a full 1% cut at that stage, given that the outlook described in the board's minutes does not seem to be improving.

Antipodean Capital, an Australian Quantitative Fundamental manager of FX, CTA and Volatility, has reported a positive return of 5.4% for its Currency strategy, -0.87% for the CTA, and -1.70% for the Global Volatility Arbitrage.

2008 YTD results are +2.19%, -5.99% and +9.49% respectively.

Antipodean's Craig Ferguson noted that leverage had been reduced across all three strategies to reduce risk, given the extreme volatility in all markets. In the A$ Currency Strategy profits were made no short positions on the way down as well as long positions as the dollar recovered.

Antipodean Capital has a track record since February 2006, and an annualised return in the Currency strategy of 10.98%. The CTA strategy was established in August 2006 and has returned an annualized 21.78%, while the Volatility Arbitrage Strategy was established in December 2007 and has returned 22.60% annualised.

The federal government has presented a revised bill to parliament which will permanently ban naked short selling. An interim ban on all forms of short selling (with certain exceptions) has been in place since 21 September 2008 but ASIC has announced, as planned, it will lift its ban on the short selling of non-financial stocks from 19 November 2008. The ban on covered short selling of financial stocks remains in place until the 27 January 2009.

In conjunction with this legislation the industry regulator ASIC, together with the market body ASX, has outlined the reporting and disclosure framework for the practice of covered short-selling. There has been much discussion in the media that this framework is inadequate in that it only requires the reporting of daily gross short sales. In effect this will not indicate the aggregate number of short sold positions with the buy-back of stock to close out the short positions being taken into account.

In relation to this issue, the Australian arm of the Alternative Investment Management Association (AIMA) has stated that: "Interim measures designed to only capture daily trade data will give no transparency into the size of the short interest in a listed company, or the rate of change in the short interest. Reporting small daily trade data will significantly distort the actual shorting activity in a company's stock as it fails to disclose position size and its implied impact on the stock's price behaviour."

To read the full ASIC Statement, click here.

Fortitude Capital's Equity Market Neutral funds continued their positive performance in October, returning +3.12% for the onshore fund, and + 2.35% for the Cayman fund, bringing YTD 2008 performance to 11.64% and 7.75% respectively.

Given the market's (ASX200) performance of -12% for October and a continuing restriction on short selling, Fortitude's performance is undoubtedly positive. The fact that Fortitude's onshore fund has yet to record a negative month this year is almost unique, even amongst absolute return funds.

Fortitude's onshore fund has close to a 4 year track record, and has achieved positive returns in 41 out of 44 months.

Absolute Return funds surveyed by AFM have started to report their October results and preliminary analysis indicate it was another difficult month for the industry with quite diverse results. To date the average return for the month is -3.54% (based on 35% of funds in AFM's database having reported) compared to September's average result of nearly -5%.

The best performing strategies have been non equity based (i.e. Commodities, Currencies and Managed Futures). Equity based strategies have suffered but still on average outperformed the underlying equity benchmarks with the S&P/ASX200 Accumulation Index ending down 12.61% for the month and the S&P500 Total Return Index down 17%.

At an individual fund level, the best result reported has been Argus Capital Management Pty Limited with their Dynamic Multi-Strategy Program returning 11.77% in commodities. Fortitude Capital continues its unequalled record of positive returns every month this year achieving 3.12% for October in it Absolute Return Trust using an equity market neutral strategy.

Australia's Absolute Return and Hedge funds continue to outperform their Equity Fund peers. As reported in the Australian Financial Review, "the median [equity] fund posted an 11.3 per cent loss in October, bringing losses over the past 12 months to 35.7 per cent according to Mercer Investment Consulting." It was further reported, the best equity fund return for October was negative 6.1% while the worst return was negative 18.3%.