Fortitude Capital, which has the extraordinary record of having not produced a negative return for the last 19 months, has returned +0.55% for July to take YTD performance to +4.13% and +12.1% for the past 12 months.

Fortitude is broadly a market neutral fund, achieving this via multiple strategies across ASX listed securities. In July's strong market (the largest percentage gain in the market since December 1993) the manager's long gamma derivative overlay struggled, but this was more than offset by M&A activity as opportunities arose from corporate Australia's recapitalisation process which has now spread to the smaller listed sector.

Since March 2005 the fund has only suffered 3 negative months with the largest drawdown being -0.50% in December 2005, reflecting the manager's major focus on risk management and capital preservation.

Visit Fortitude Capital's Absolute Return Trust fund profile.

The Lanterne Arran Fund has returned 0.04% in July to bring 2009 YTD to 23.72%.

The manager noted that cyclical stocks, which have outperformed the defensive sector as global growth forecasts have been revised up, are looking overbought in the short term as companies report annual results in August. Looking beyond that, they noted that the outlook for cyclicals, particularly resource stocks remains positive as the global de-stocking cycle ends.

The Arran Fund is Lanterne's offshore fund, launched in August 2004 and has funds under management of US$30m out of Lanterne's total FUM of US$90m. Both the Arran and Ailsa (onshore) funds use an actively managed long short trading style investing primarily in ASX100 stocks. Top down macro themes and bottom up fundamental research combine with active trading to construct portfolios designed to provide returns regardless of market conditions.

Lanterne's annualised return since 2002 is 12.63%.

Commodity Strategies Ltd, who operate a systematic trading strategy across both a long/short and long only portfolio, made significant gains across both in July with broad based attribution, particularly in energy and metals trading. The Long only portfolio has gained 16.98% in 2009 YTD, and has an annualised return of 12.82% since inception in December 1999. The long/short portfolio, which was launched in October 2007, has gained 11.29% in 2009 and has returned an annualised 24.27% over that period.

Visit Commodity Strategies' Long Only Programme profile.

Visit Commodity Strategies' Long/Short Programme profile.

The Bennelong long/short (market neutral) equity fund has returned 2.24% for July to take their 2009 YTD return to +9.52% and their annualised return since inception in February 2002 to 20.61%. Bennelong noted that the local market had recorded its strongest one month gain since December 1993 as investors gained confidence from better than expected economic data, second quarter company results in the US, and stronger commodity prices. However the manager also noted evidence that investors are possibly re-evaluating the pace and extent of some of these moves. Looking forward the manager note that the S&P200 has rallied 37% from the low in March, while forward earnings (according to Goldman Sachs JB Were) have been downgraded approximately 5%, leading to a 42% expansion in the Index's R/E ratio. As such they feel that further expansion is unlikely and will be dependent on earnings recovery in FY 2011 and beyond. View the detailed profile for Bennelong's Long Short Equity Fund.

Pengana's Australian Equity Long Short fund outperformed the ASX with a return of 8.5% in July, to bring 2009 YTD performance to 24.52%.

Like many of their long biased peers, Pengana's Australian L/S equity fund has rebounded strongly on the back of the sharp rally in equities to produce a YTD performance of 24.52% and an annualized return since inception in May 2004 of 9.29%.

Pengana noted that they had deliberately avoided aggressive shorting in recent times but intend to resume as the opportunities arise on a selective basis, as the domestic reporting season commenced. At the time of writing the portfolio has a 53% net equity market exposure.

Macquarie's Special Events fund continues to prosper as capital raisings power performance +3.93% for July, and +30.12% 2009 YTD.

1 year return: +24.55%. Annual (Oct 2003) +12.44%

The Special Events fund, which incorporates a multi strategy process including M&A risk arbitrage, buy-write, event related trading and capital raising reported that Capital Raising was the most profitable (+2.4%) as a result of an active pipeline continuing with $10.4b spread over 15 transactions across all sectors during the month.

The targeted buy write strategy produced a further 0.8% return in spite of implied market volatility declining by 3-4% over the month as the market rallied on expectations of improving economic conditions. The market declined by over 5% early in the month, only to rally by almost 13% to finish 7.3% higher.

Regal Funds Management's Amazon and Tasman funds have returned 4.97% and 4% respectively for July, bringing 2009 YTD performance to 15.97% and 19.94%.

The manager noted that the highlight for the month was the financial sector which contributed strongly, largely through strong bounces in three recently capitalised property trusts, in addition to long positions in the banks. Coal seam gas stocks in the energy sector also contributed positively, whilst on the short side domestic cyclicals suffered as the Australian economy proved to be more resilient than anticipated.

Tasman: 1 year return: -2.88%. Annual: (May 2007) +16.17%
Amazon: 1 year return: +0.29%. Annual: Sept 2005) +21.44%

Both the Amazon and Tasman funds are market neutral, with the Amazon fund based in the Cayman Islands and the Tasman fund domiciled in Australia. Both funds are predominantly invested in Australia, with limited exposure to European stocks.

PM Capital's Absolute Performance Fund continues to benefit from equity market rally with a 10.9% return for July.

The manager reported that fund performance in July was assisted by better than expected results in the US, in particular in the banking and technology sectors. Credit securities purchased throughout the first half of the year contributed to performance as credit markets continued to ease. The fund remains fully invested as the manager believes their stock holdings represent good value on a two to three year horizon.

1 year return: -5.9%

PM Capital's Global Equity fund is a focused non indexed portfolio, typically consisting of between 35 to 45 stocks and under normal circumstances is between 80% and 120% invested, although if appropriate the fund may be 100% invested in cash.

Absolute Return Capital Management's Australian equity long short Ascot Fund reported a positive result for July, returning 6.6% net of fees, to produce their best ever return over the four years since the fund's inception in August 2005.

July's gain of 6.6% has brought the 2009 YTD result for the Ascot Fund to 12.37% following their positive return in calendar 2008 of 5.24%, and an annualised return since inception of 14.33% with volatility of just 5.56%.

Commenting on the result, Managing Director Craig Connelly noted not only the record result and a pleasing start to the new financial year, but the fact that the performance was based on an average net long position of only 57% of funds under management (beta adjusted), attributing the performance to a combination of strong stock selection as well as the effective use of call options to provide leverage.

Looking forward the manager is bullish, noting that the ASX's strong bounce off the March low was from a market that had overshot to the downside, and intends to retain a net long bias while remaining vigilant to lock in trading profits while continuing to manage their positions in a pro-active manner.

June saw a continuation of positive results for the Australian absolute return and hedge fund sector, largely on the back of an ongoing rally in equities, particularly the ASX 200. Although AFM's index was positive, outperforming the S&P 500 and the MSCI World ex Australia index, it underperformed the ASX 200 which rallied 3.59% as confidence continued to flow back into investors.

For detailed analysis of performance for each strategy, industry comment and ranking tables, please open the attached .pdf file.

ATTACHED FILESJuly 2009 absolute return and hedge fund review (pdf format)