Defaqto launches Absolute Return Guide for 2010 and Absolute Return case study
Absolute Return Funds have continued to be launched into the retail sector throughout 2009 and into 2010. They are not only launched into the Investment Management Association (IMA) absolute return sector, and can be seen in other IMA sectors, particularly the IMA cautious managed sector.
Absolute return investment techniques are popular as they combat adverse and volatile market conditions to produce steadier returns for medium to long term investors.
The IMA has produced two annual reviews of the sector and is helping to define some important features of these funds and highlight their suitability for retail investors.
Unless stated, the standardized period of time within which to judge a fund's ability to generate positive returns is 12 months. I.e. when a fund talks about ''positive returns in all market conditions'' the accepted judgment period is 12 months. A number of fund managers have explicitly lengthened this by stating their funds' should produce positive returns over a three year horizon and it is, of course, important to understand the objectives of any fund before investing.
Positive returns are not guaranteed. Absolute return funds carry risk, and the positive returns made are reliant on the judgment and skill of the fund management team and other variables associated with investment risk.
Although such reviews are helpful, they do not look at the variety of techniques that the fund managers themselves can engage in to balance risk within the portfolio and generate positive returns regardless of market movements.
Fraser Donaldson, Insight Analyst - Funds at Defaqto has published a new case study to help intermediaries understand absolute return investment further.
The case study has been produced as an educational aid to advisers considering investment in absolute return funds, and looking at diversity through multi-asset funds.
The Standard Life Investments, Global Absolute Return Strategies (GARS) fund, has been available to retail investors since early 2008. Since launch it has produced a return of 10% p.a. (as at 30 Apr 2010: Fund Launch 2006 - Source Lipper) and has been selected due to the width of assets and strategies that it has been able to employ.
This fund has been selected for the following reasons:
Since GARS was launched into the retail sector (early 2008 allowed) it has seen extreme Equity, Fixed Income & Currency market conditions in both directions
The Global multi-asset focus allows it to employ a wide variety of derivative instruments, and absolute, total and relative return techniques. This makes it extremely suitable for an educational study of this type
The Multi-Asset Team at Standard Life Investments have given Defaqto's Researchers access to the Team's investment activities over the periods covered
The full case study can be downloaded here.
Further excerpts are also available from the updated Defaqto Guide to Absolute Returns 2010, which has now been updated to incorporate recent Fund Schedules and further insights into Absolute Return Investment techniques.
