L&G Diversified Absolute Return fund loses over 8% in a day !

wombat42_2

http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F0000026NM&lang=en-GB

http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/l/legal--and--general-diversified-absolute-return-trust-accumulation

Old_Slaphead

Looks very weird - I'd bet next valuation is sharply up

wombat42_2

even more weird as it is supposed to be a low risk absolute return fund where market movements are supposed to be smoothed out. - i believed it was about 90% cash. If you look at the H&L performance chart you will see that it was down in most of the previous few days as well.

dunstonh

even more weird as it is supposed to be a low risk absolute return fund

According to my data its a higher risk absolute fund. Indeed, there are only four in the sector with a higher risk profile. All the rest are lower and most by some way. (it's risk score is 3 times more than the sector average)

The risk profile is showing virtually identical to the balanced managed fund sector average and the performance over 12 months is just 0.3% different.

even more weird as it is supposed to be a low risk absolute return fund where market movements are supposed to be smoothed out.

Not really. They look to provide a positive return in all market conditions and capital growth over the long term by investing principally in financial derivative instruments to gain either long or synthetic short exposure to a wide range of assets across all markets and currencies. They can still get that wrong.

When you look at the fund compared to others in its sector, ignoring the risk for the moment as we know its higher, it doesnt perform anywhere near in sync with others in the sector.

1echidna

I have to say all this mumbo jumbo about risk is a load of rubbish. One can have a low risk portfolio but if the worst happens one loses heavily, the same as one would with a high risk portfolio

wombat42_2

dunstonh the non cash part of the fund invests in absolutely anything at a global level such as derivatives, currency exchange rates, commodity or equity indices.

turbobob

wombat42 wrote: »

even more weird as it is supposed to be a low risk absolute return fund where market movements are supposed to be smoothed out. - i believed it was about 90% cash. If you look at the H&L performance chart you will see that it was down in most of the previous few days as well.

90% cash in what currencies? 90% of its assets in Sterling in the bank would not be consistent with it's objectives IMO. My understanding was that this was along the lines of a global macro fund. I think the extreme volatility over the last week in all asset classes (equities, bonds, currencies and commodities) will have caught out a lot of funds.

Octopus's Absolute fund has performed appallingly recently. The manager was net short until a few weeks ago. Then this took another pasting over the last couple of weeks. It's responded by changing its benchmark to a lower one (3 month rather than 12 month LIBOR) and changing its name..

wombat42_2

Octopus was a stellar performer last year but not this year, see
http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?companyid=&tab=prices&sectorid=136&tab=prices&x=15&y=8

I think Absolute return funds are a nice idea in theory but in practice they arent much good and i give up on them. I currently feel pretty secure mainly in Gold funds anyway.

StevieJ

1echidna wrote: »

I have to say all this mumbo jumbo about risk is a load of rubbish. One can have a low risk portfolio but if the worst happens one loses heavily, the same as one would with a high risk portfolio

I must admit my high risk emerging markets and Asia funds have propped my portfolio up over the past couple of years even though we have suffered a Global recession, they have been highly variable though.

StevieJ

Why doesn't Artemis strategic assets count as an absolute return fund?

dunstonh

wombat42 wrote: »

dunstonh the non cash part of the fund invests in absolutely anything at a global level such as derivatives, currency exchange rates, commodity or equity indices.

Most of what I wrote in the post about where they invest was actually copied and pasted from the L&G fund objective. So, it is within the remit of the fund.

Why doesn't Artemis strategic assets count as an absolute return fund?

Simple answer is because it isnt one. The fund manager can more or less invest where he likes. He may be cautious sometimes but may take greater risk other times. The fund is actually higher risk than the L&G fund being discussed. At times it may look lower or higher but you have to risk rate it on what it may hold.

I think Absolute return funds are a nice idea in theory but in practice they arent much good and i give up on them. I currently feel pretty secure mainly in Gold funds anyway.

I have never liked them. They were a fad to catch the fashion investors. The positions they took often did place them to provide returns in decline but that would handicap them in periods of growth. They are often mistaken as low risk when only a very few are. Most are consistent with medium risk or even medium/high.