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.
