More than a one trick pony...NZ funds up in May 09

Hi there. The Ernst & Young New Zealand Absolute Return Index had a strong year in 2008. The index was +20.4% with most of the gains attributable to directional, trend-following, volatility and commodity strategies. This led some to comment that the index was really only a CTA index as its correlation with CTA's was high. 2009 is proving that our index is indeed more than a "one trick pony". May 2009 saw a strong move higher for the index, correlating highly with the global HF industry and equities - at a time that we would think it would be appropriate. The index was +6% for the month, putting it +7.5% for the 2009 year so far. The index is now annualizing on a compound basis at 19.95% with the largest peak to valley draw-down so far being -6.5%. New Zealand managers continue to demonstrate competence in investment management.

New Zealand index holding its own...

Hi. Well...after running high correlation co-efficients with managed futures strategies last year, the Ernst & Young New Zealand Absolute Return Index has proved its mettle to the end of April, +1.877%YTD to the end of April, a year on year return of 12.7%. The index is annualizing at just under 17%. Managed futures strategies are currently down on a YTD basis so it is good to demonstrate that New Zealand managers as a group are not a "one-trick pony". It is also great to see the equities strategies kicking in, with one of the managers, Pie Funds, posting a 14% return in April. Diversification sometimes works!

Momentum...and movement....

Another couple of months and the New Zealand absolute return industry moves on...in a couple of ways. Year to date performance for the Ernst & Young New Zealand Absolute Return Index retains positive momentum (+2.495% YTD to the end of Feb) and annualized returns are running circa 19.50%. This is mildly spectacular in the current environment. We are getting some local media coverage this week and a new global PR campaign is due to start soon. Some local managers are seeing substantial asset inflows against a global redemption trend. But this doesn't take away the fact that some of us are being driven to giving up on making New Zealand a global base for operations. In New Zealand, and nearby, there are some great strategies run by some innovative teams. But put the current global economic environment against the distance from customer-base with which most of us deal with, and there needs to be compromise. And so it is that we "fare thee well" to most of the 36 South Investment Managers team as it moves its centre of operations to London. Some members of the investment team and administrative staff will continue to reside in New Zealand, but the key principals are off to London to leverage a strong performance record from the last few years. So is there a lesson here? I believe so. We have to start thinking globally - which means accepting international geographical representation for our businesses is a "must". My business Pure Capital is doing just that, establishing a full European presence to harness both business development and timezone efficiencies. We are partnering with a European business to break down some of the initial barriers. I believe this is a logical development for the New Zealand Absolute Return Industry and will eventually lead to a situation where we retain the lifestyle and other benefits - whilst continuing to grow our businesses - and their potential for even greater growth.

A strong year for New Zealand managers

Well - the final numbers for 2008 are in for the Ernst & Young New Zealand Absolute Return Index - and it was a good year. The index finished the year +20.398% YTD after a +2.372% monthly performance in December. Since inception in June 2007 the index has posted a cumulative gain of 30.508% and is currently annualizing at 19.97%. Performance for the year was driven by strong gains in volatility, trend-following strategies and to a lesser extent, commodities. Equity market strategies suffered in line with broader market weakness but saw some late strength in December. We are now getting some interest in putting together a fund based on the index...so watch this space.

Another good month for New Zealand managers...

Hi - another good month for New Zealand managers with the Ernst and Young New Zealand Absolute Return Index returning +1.502% in November making it +17.597% year-to-date. Since inception the index has returned +27.471% and is currently annualizing at +19.24%. In terms of sectoral performance - weakness in global equities again in line with global equity indices, and strength in volatility and tail risk strategies.

Anthony Limbrick

Chairman

NZARA

Amber Partners on Madoff

Hi

Amber Partners, a London-based hedge fund certification business recently put out an interesting Amber Alert (comment) on Madoff.

Key points made were:

1. Investors who invested directly with Madoff did not buy shares in an offshore company or partnership interests in an onshore limited partnership.
2. It was extremely unusual for a firm of Madoff's size and supposed reputation to utilize an audit firm which was quite clearly not one of the "top 4" firms nor a specialist in auditing broker-dealers.
3. Amber Partners has never known a broker that refuses to send trade tickets to clients, other than in hard copy form via the postal system.
4. Madoff was infamous for not letting investors visit their offices to performan any on-site due diligence.
5. Many who invested with Madoff recognized the risks involved. A logical counter argument to all of the above "red flags" was that there would have to be substantial collusion within Madoff for such a fraud to go undetected for such a long period, and there was also the fact of his continued regulation by SEC and FINRA.

If you want a copy of the release, please register at the NZARA website (www.nzara.org). Once website access has been granted you may find the document in the Library on the site. You could also register on the Amber Partners website at www.amberpartners.com for future alerts and announcements.

Regards

Anthony Limbrick

From the FT - "Ten reasons to..."

Hi

The Financial Times (http://www.ft.com/) has some excellent columnists and their Alphaville blog (http://ftalphaville.ft.com) is a great way to get a real time view on market developments.

With the Madoff disaster putting the global alternative investment industry under even more pressure, I thought it was time for some educated light relief.

Please see the link below for "Ten reasons why you should hug a hedgie" from the Lombard column. Amusing - but also some good points made - points that should be considered before the proverbial "baby" is thrown out with "bath water".

http://www.ft.com/cms/s/0/0f5e33aa-cbdc-11dd-ba02-000077b07658.html