Standard Life Investments Global Absolute Return Strategies (GARS)

Sterlingtimes

Are absolute return funds (or similar) a good idea for pension investment? Share Radio discussed recently whether need funds needed regulatory investigation.

In my choosing a safer investment portfolio, my employer's pension scheme has lumped me into GARS. GARS manages £26 billion of our money and is 59 out of 68 in its sector. Recent performance has been pretty dreadful.

Do others here use absolute return funds?

bigadaj

No, high costs and frequently poor returns.

AnotherJoe

Do you have a choice of what to invest in?

Kendall80

I have 3k invested in SL GARS.


You're right, recent performance has indeed been poor. However, thats far too short a timescale to judge the fund on. Over the previous 4 12 month periods it has roughly returned 4%, 8%, 4% and 10% with an average of 6% per annum since its 2008 launch. Its likely that recent currency fluctuations have reduced its performance. Personally, i'm content to add to it while its down and my other funds are riding high.

dunstonh

Its likely that recent currency fluctuations have reduced its performance.

Although most areas saw an increase because of that.

Absolute funds are a niche fund that can do well in a bit of the economic cycle but not in the whole economic cycle. They are not an invest and forget fund.

Linton

The purpose of Absolute Return funds is to make a positive annual return regardless of the state of the market. So they are comparable perhaps with the wealth retention ITs or safe bonds. They are not suitable for the long term investor looking for growth except perhaps as a small amount of diversification.

From my investigation of the area the SL fund is one of the better ones although it did make a small loss in the past 12 months, for the first time IIRC. If your objectives require you to hold an AR fund it would be foolish to look at the best performer tables - the better a fund does in the good times the more likely it will do badly in difficult conditions. Rather one looks for a steady return, which of necessity will be relatively low. The main problem I see with AR funds is that they really started near the bottom of the 2008 crash and have yet to be seriously tested.

In the OPs case, unless he/she is seriously risk averse or is near to retirement and is planning to buy an annuity, the SL GARS fund or any other AR fund seems inappropriate as a core holding.

Kendall80

dunstonh wrote: »

Although most areas saw an increase because of that.

If i'm not mistaken the fund uses monetary instruments such as hedging and shorting. Its possible that the unexpected result of the referendum and subsequent fall in the pound caught the fund managers off guard. Whether they should've better prepared for that eventuality is another question.

bowlhead99

The mandate is to produce a positive return across different market conditions exceeding some benchmark while avoiding the volatility and negative periods associated with stocks and bonds.

However, in unusual market conditions when stocks and bonds are both rising at decent rates at the same time for several years in a row, you would not expect the GARS strategies - which deliberately avoid having massive long exposure to either of those asset classes - to outperform the funds that do.

They employ a large number of strategies at once, which can be somewhat opaque, and you are generally banking on their managers being good at selecting those individual strategies which they pursue, and having them perform well, rather than "the market" performing well - because they may be short or neutral "the market".

At one point SL had a massive portion of their own pension fund in this. Of course, they may have different objectives to you. FWIW, I have some GARS in my own work pension (which I use within the lower volatility portion).

Malthusian

No, as per Warren Buffet's Rule #1: Don't lose money.

Corrolary to Warren Buffet's Rule #1: Don't invest in investments that can lose you money even though markets have gone up.

AnotherJoe

Kendall80 wrote: »

I have 3k invested in SL GARS.


You're right, recent performance has indeed been poor. However, thats far too short a timescale to judge the fund on. Over the previous 4 12 month periods it has roughly returned 4%, 8%, 4% and 10% with an average of 6% per annum since its 2008 launch. Its likely that recent currency fluctuations have reduced its performance. Personally, i'm content to add to it while its down and my other funds are riding high.

Much the opposite, so it looks like a very !!!! poor performance has been improved to merely poor.

Sterlingtimes

Linton wrote: »

In the OPs case, unless he/she is seriously risk averse or is near to retirement and is planning to buy an annuity, the SL GARS fund or any other AR fund seems inappropriate as a core holding.

Thank you. Yes, I am near to retirement and I am risk adverse but I would not be contemplating an annuity. Apart of my DB pensions, the greater part of my DC is in equities, but I am holding £90,000 in cash to bridge the five year gap until State Pension is paid. My difficulty is finding something between placing a further £60,000 in the "safer" area between cash and equities. The absolute return funds attract me more than gilts but their behavior is peculiar, for instance my loss of 2% over 12 months in GARS is offset by an 11% return in an equal holding in Newton Real Return. In a way, over performance is almost as worrying as under performance because the funds are not behaving as they should.