Decreased forced institutional selling and lower market volatility drove the Elstree Enhanced Income Fund to a return of +1.31% in January, while the Elstree Australian Enhanced Income Fund was up +1.05%.

More specifically, both funds benefited from an underweight position in the banking sector, which underperformed the market as a whole. As interest rates continue to decline, and amid dividend and corporate profit uncertainty, the manager believes the search for income sources will be key to the funds' prospects over the medium term. They are encouraged by improving credit conditions globally, and with a greater stability in prices expect investors to become less risk averse in areas such as ASX listed hybrids. This combined with the decreased returns from deposits and dividends will further bolster the funds' prospects.

The Excalibur Absolute Return Fund posted a gain of +0.54% in January after a strong 2008, bringing its compounded annual return to +21.95%.

As market volatility decreases the manager is aiming for a 20%+ return in 2009, while maintaining a low level of risk. The Excalibur Absolute Return Fund is a currency/FX fund that holds AUD against the JPY, capturing the significant interest rate differentials between the countries whilst holding A$ put options over the core position to improve capacity, control risk and allow for profit generation in down months.

The Pengana Emerging Companies Fund was down -1.9% in January, bringing its one year return to -44.8%.

Surprisingly the Fund's poor one year return outperformed both the S&P/ASX Small Industrials Accumulation Index and the Small Ordinaries Accumulation Index, which were down -46.7% and -47.9% respectively. The Fund will remain defensively positioned, pending the outcomes of the upcoming reporting season, and given the ongoing uncertainty in Australian markets.

Another Pengana fund, the Global Resources Fund, was up +2.43% in January, following a disappointing 2008 result (down -32.87%). The Fund, which was structured with a net long position, benefited from rising Australian dollar denominated commodity prices during January. Equinox, Vale and Rio Tinto contributed positive returns to the Fund, while losses were generated in Alumina and Anglo American.

St Helens Capital's Arran Fund, an actively managed long short equity fund, was up +3.67% in January while the ASX200 was down -4.88%.

This result comes after the Fund posted a respectable 2008 return of -5.44%. Gains were made on short positions in Newcrest Mining and long positions on Rio Tinto, partially negated by losses on Leighton Holdings (long) and CSL (short). The manager believes the Fund is well positioned to take advantage of the eventual upswing in equity markets, and believes there are positive signs for the Australian economy although this may not become apparent for another few months.

Naos Asset Management's two absolute return funds were mixed in January, after both funds experienced extremely disappointing returns in 2008.

The Naos Small Companies Fund was up +1.76% for the month, although in the 12 months to January it was down -54.74%. Illiquidity and deleveraging continued to affect small Australian listed companies, although the Fund is continually restructuring its long portfolio to include companies with strong medium term fundamentals and potential.

The Naos Absolute Return Fund was down -1.40% in January, bringing its 12 month return to -22.91%. The Fund maintained its defensive strategy during the month, with high levels of cash and investing 10-25% in long beta stocks. The Fund is looking to invest in companies that are sensitive to lower interest rates and lower Australian dollar, as well as in certain capital raisings.

The Apeiron Global Macro Fund, managed by Redwood Capital Group, produced a strong return of +3.82% in January, after ending 2008 up +18.83%.

Long positions in Gold, and entry points presenting themselves in both equity and bond markets during January helped drive the Fund to its positive result. Due to the ongoing volatility of global markets the manager will continue with a negative bias strategy, although there may be some tradeable rally opportunities in some oversold Asian equity markets. The Fund will also continue to trade long in Gold and precious metals, believing they will outperform the market in 2009.

The Antares Lodestar Absolute Return Trust lost -0.76% in January. The broader market in comparison, after being down by more than -10% at one point, ended the month down -4.88%.

During January the Trust significantly decreased its exposure to the market, with net exposure reduced from 43% to 15% and gross exposure down from 63% to 43%. This reduction was mostly made up of long positions, as short positions were increased slightly to 10%. In terms of the Trust's performance in January, positive returns were achieved from positions in Leighton Holdings, Macquarie Group and Flight Centre, which were offset by negative returns in Challenger Group, A J Lucas and NAB.

The Bennelong Long Short Equity Fund was up +5.69% in January, following on from a return of +11.95% in 2008.

In a month where the Australian equity market outperformed overseas markets in local currency (but dropped -14% in US dollars), most gains were made in short positions taken on stocks that fell due to investor concerns on stock specific issues. The Fund will maintain leverage at current levels (3.2x NAV) while significant volatility remains in the market.

The Kapsteam Absolute Return Income Fund was up +0.94% in January (+7.75% since January 2008). In their monthly commentary piece, Kapstream Capital discusses why bonds were not able to protect investors from losses in 2008.

Kapstream attributes the poor performance of bonds in the volatile markets of 2008 to fund managers, attempting to outperform their benchmarks, investing in higher risk instruments in the pursuit of higher yields from 2006 onwards. Bonds rated at BBB or higher were trading only 30-50 basis points above government bonds, while new products such as CDO's and CLO's were introduced, allowing managers to continue producing the high excess returns that they and investors were used to. Managers also either used cheap leverage or invested in lower quality bonds, or both, to increase returns. Once the markets began to reprice risk to more realistic levels in 2007 and 2008 these returns abruptly stopped.

As a result only bond managers that invested only in government bonds performed well in 2008, although the returns they achieved are unlikely to be repeated in 2009, due to lower interest rates and government intervention in the market.

The Commodity Strategies Long Only Fund, which returned an impressive +10.47% in 2008, was up +0.53% for January, outperforming its benchmark (the Reuters/Jefferies CRB Total Return Index) by +4.52%.

The Commodity Strategies Long Short Fund, which also performed strongly in 2008 (up +22.28%), recorded its fifth consecutive month of positive returns in Janaury, up +1.52%.

The Long Only Fund's January result was attributed to gains in silver, platinum and gold strategies, partially offset by losses in nickel. The Long Short Fund recorded both its largest gains and greatest losses in energy commodities, with gains in crude oil and natural gas offset by losses in RBOB gasoline.