Australian hedge funds [including offshore hedge funds offered to Australian investors] reported minus 1.14 per cent on average for the month of January 2010. Equity based hedge funds outperformed their long-only rivals that were hammered by the 6.18 per cent per cent drop in Australian equity markets. Australian long/ short equity hedge funds were down 2.45 per cent while market-neutral equity hedge funds reported a positive 0.08 per cent in January.

The non-equity strategies ranged from positive 1.78 per cent for fixed income to minus 2.04 per cent for global macro, commodities and futures. The strongest individual fund return in January was a 10.88 per cent performance by RAB Octane Fund Ltd. Class D [US$]). To better demonstrate equity hedge fund performance, TAP Australia is constructing an Australian Long Short Index based on about 40 local funds and going back to 2001. This index was up 40 per cent versus the S&P/ASX 200 of 30 per cent over 2009, and has significantly out-performed the S&P/ ASX 200 and MSCI World ex Australia over the past nine years.

Index charts will be available from next month. As a consequence of the industry’s positive performance, I have received quite a number of offshore enquiries for Australian Long Short and Long Only Equity Managers over recent weeks. This development suggests global Fund of Fund investor flow is starting again, and also indicates offshore investors are looking for diversification, hence their interest in Australia. What really disappoints me is that very few Australian investors support local managers. With the global enquiries that I am starting to get, and it is still early days, offshore investors will again outweigh local investors in our Australian based funds.

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