The Bennelong Long Short Equity Fund lost -1.24% in May driven by the defensive positioning of the Fund, although it maintained a positive YTD return of +15.68%.

1 yr return: +21.33%. Annual (Jan 2003): +24.86%

Portfolio activity was low again during May, as the manager remained skeptical about economic conditions and outlook. The top spread for the month was long Riverside Mining with against short Fortescue Metals, while the bottom spread was long Billabong versus short David Jones.

The Attunga Enviro Opportunities Fund was flat in May, gaining +0.02%, due mainly to the delay to the CPRS and poor spot prices.

1 yr return: +1.2%. Annual (Jul 2006): +39.94%

In early May the Federal Government announced that their Carbon Pollution Reduction Scheme (CPRS) would be delayed for 12 months, which caused electricity prices to move steeply downward as the cost of carbon was removed. Poor spot prices overall also saw all electricity prices decline, as a result Calendar 2011 contracts fell from around $60 to $50. Attunga believes prices may have further to fall if the upcoming cold weather fails to support higher spot market outcomes. Beyond that however there is scope for higher prices as supply issues in some areas of Australia may increase prices and volatility next summer.

The Austral Equity Fund recorded another month of small positive returns, up +1.24% in May, as it begins to increase its equity exposure.

1 yr return: +7.45%. Annual (Aug 1997): +13.28%

At month end the Fund still held a significant cash position (32.8%), however during the month the Fund moderately increased its equity exposure (5.6% in M&A and 8.8% in long positions at month end) as signs emerge of decreasing volatility in global markets.

The MM&E Capital Takeover Target Fund posted a gain of +3.82% in May, outperforming its benchmark the ASX 300 Index.

1 yr return: -19.23%. Annual (Aug 2005): +7.13%

Individual stock selections were the main contributor to this outperformance. Caltex, benefiting from expected consolidation of the Australian petrol market, IAG and Tower, whose premium incomes are rising due to the recent string of extreme weather events, and APN News & Media, on the back of a recent capital raising, were the standout performers. Asciano also made a positive contribution, as the Fund sold its position for a second profit given the ongoing uncertainty regarding its asset disposal program.

Both Commodity Strategies funds recorded impressive gains in May, the Long/Short Programme up +11.21%, and the Long Only Programme up +10.54%.

1 yr return (Long/Short): +4.78%. Annual (Oct 2007): +24.51%
1 yr return (Long Only): +1.93%. Annual (Dec 1999): +12.47%

Energy commodities were the key contributor to overall performance for both funds. In particular, RBOB gasoline, crude oil and heating oil performed strongly. The only negative performance came from strategies in aluminium, natural gas, cocoa and cotton, with the largest individual negative return being less than -0.5%. Both results are subject to final confirmation from the Funds' administrator.

The cumulative return now stands at +694.2% for the Long/Short Programme, and +203.18% for the Long Only Programme.

The MQ Special Events Fund, managed by Macquarie, gained a record +9.23% in May, the seventh consecutive month the Fund has posted a positive return.

1 yr return: +10.64%. Annualised (Sept 2003): +10.78%

The best performing strategies included capital raisings (+4.2%) and targeted buy-write (+3.3%). The glut of attractively-priced equity issues in Australia and New Zealand underpinned performance, particularly while credit markets remained expensive. Investments in the materials, energy, gold and financial sectors in the Fund's targeted buy-write strategy also provided solid returns.

Australian based Absolute Return and Hedge Funds recorded a second consecutive positive month in April of 2.71% on the back of the ongoing global rally in equity markets.

Not surprisingly equity based strategies were the best performers, but with the exception of Managed Futures and Market Neutral, all single strategies recorded a positive month. The overall index of single funds returned +3.03% (based on 88% of results mtd) against the ASX200’s performance of +5.54%.

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

ATTACHED FILESMay Absolute Return and Hedge Fund Review (pdf format)

Australia's regulator, ASIC, has lifted the limit on the covered short selling of financial stocks which was originally imposed on 21 September 2008 as part of the overall ban on short sales.

In reaching  the decision, ASIC noted that the global financial crisis and global recession continues to place pressure on Australia's markets', and that they 'will not hesitate to reimpose the ban immediately ... and without consultation if it considers market conditions warrant such action. ASIC will, in its monitoring of the market along with ASX, pay particular attention to short selling activity by participants (including activity by hedge funds and similar institutions) which could potentially harm Australia's financial system.ASIC also advised that the daily reporting of gross short sales would continue, as would the publication of aggregate short sale statistics the day after trading, until the commencement of the Government's permanant disclosure levels, which have yet to be announced.

Optimal Fund Management's five absolute return funds all reported positive returns for April, with performance ranging from +0.73% to +4.75%.

The Optimal Japan Absolute Long Fund was the strongest performer, up +4.75%, however this was seen by the manager as disappointing as the Topix index rose by over 8%. Real estate stocks performed well, however some of the Fund's top positions, including Nintendo and Shinestu Chemical, ended the month down. The main drag on return however was the Fund's cash holding (approximately 40% of the portfolio), which benefited the Fund earlier in 2009 however is now offsetting positive performance. The manager is expecting to increase the Fund's exposure going forward, however is looking for lower entry points than current levels.

Regarding the other Optimal funds, the Optimal Asia Pacific Fund gained +3.46%, the Optimal Australia Absolute Trust rose +1.4%, the Optimal Japan Fund was up +0.73% and the Optimal Asia Fund posted a return of +1.9%.

The Prime Value Growth Fund gained +4.9% in April, in a month where the Fund's cash holdings held back overall return in another month of market rallies.

Overall sector allocation was positive, the Fund underweight in financial stocks and overweight in industrials and consumer staples. The biggest individual contributor to performance was ABB Grain, which was up +45.8% after a takeover proposal from Viterra, while Mondelphous and Wesfarmers also up over 20% each. Commodity and energy stocks offset these positive returns, with Newcrest (-8.5% on lower production for 3Q), Lihir Gold and Oil Search the largest negative contributors. Although the manager remains cautious regarding the length and sustainability of the current market rally, they have gradually been adding positions to the Fund and reducing cash levels.

Prime Value's other Fund, the Imputation Fund, was up +7.8% in April and outperformed the market benchmark by 2.1%. The manager has continued to consolidate the portfolio, with core stocks now comprising approximately 50% of assets.