Have Absolute Return Funds had their day?

Linton

In my view Abs return funds never had "their day".  In general they have failed to meet their objective ever snce they were invented.  Wealth Preservation funds have a rather different longer term objective but I think they have achieved Abs Return rather better than many of those funds that focus on it.

Aged

Linton said:

In my view Abs return funds never had "their day".  In general they have failed to meet their objective ever snce they were invented.  Wealth Preservation funds have a rather different longer term objective but I think they have achieved Abs Return rather better than many of those funds that focus on it.

Point taken. Time to get rid I think, which is what should have been done some time ago methinks.

Thrugelmir

Every dog has it's day. Doesn't mean that you disregard ever investing in the fund at a future date. Investing is cyclical in nature. Comes and goes in fads. Hence those immortal four most expensive words in the Enlish language. "This time is different". 

Aretnap

BananaRepublic said:

I am gobsmacked that a fund can perform so poorly during five years of healthy stock market returns.

An absolute return fund aims to produce a steady positive return regardless of stockmarket performance. A perfect absolute return fund would return 3-4% in a year that the stock market went up by 30%, then another 3-4% the following year when the stock market crashed by 50%. So comparing its performance to that of the stock market as a whole is arguably to miss the point of the fund.

The bigger problem is that most absolute return funds do not produce a steady positive return regardless of stockmarket performance... 

BananaRepublic

Aretnap said:

BananaRepublic said:

I am gobsmacked that a fund can perform so poorly during five years of healthy stock market returns.

An absolute return fund aims to produce a steady positive return regardless of stockmarket performance. A perfect absolute return fund would return 3-4% in a year that the stock market went up by 30%, then another 3-4% the following year when the stock market crashed by 50%. So comparing its performance to that of the stock market as a whole is arguably to miss the point of the fund.

The bigger problem is that most absolute return funds do not produce a steady positive return regardless of stockmarket performance... 

Looking at the five year performance, it really has failed miserably. An investor could very easily lose money in this fund, depending of course on the purchase and sell dates. The ‘aims to produce’ sales pitch is nice, unfortunately the reality does not match, at least not over the last five years. 

masonic

This seems to be a sector in which the vast majority of funds underperform. At various times one or two funds show good performance over the past 3-5 years and become flavour of the month, those funds then go on to underperform in the next period as the strategies that worked for them in one set of conditions fail to work when the economic climate changes. Which rather defeats the object of these funds.

NottinghamKnight

Makes you wonder if absolute return funds could effectively be simply updated endowments, with a strategy of allocating increases at a low and steady level, keeping large reserves and managing cash and returns by means of 'bonuses' whether they be annual or terminal.

Aminatidi

talexuser said:

and RIT and Personal Assets. I have all of these (dumped Ruffer) and have been putting a lot of my growth dividends into them, since they did well in the last downturn, and another can't be too far off.

Yes (for anyone not familiar Personal Assets is essentially Troy Trojan but run as an Investment Trust with Sebastian Lyon as the investment manager).

Not sure I'd go near RIT as wealth preservation/Absolute Return just because I think it can be a little more volatile than people might expect?

Aged

Aminatidi said:

talexuser said:

and RIT and Personal Assets. I have all of these (dumped Ruffer) and have been putting a lot of my growth dividends into them, since they did well in the last downturn, and another can't be too far off.

Yes (for anyone not familiar Personal Assets is essentially Troy Trojan but run as an Investment Trust with Sebastian Lyon as the investment manager).

Not sure I'd go near RIT as wealth preservation/Absolute Return just because I think it can be a little more volatile than people might expect?

RIT FE risk score is 131, as opposed to Personal Assets 44 and Capital Gearing 36. SL/ASI GARS is 25. 

tigerspill

Aged said:

tigerspill said:

I have had this fund for a number or years.  I must have invested at the wrong time, but it is now breaking even by a few pounds for the first time ever.  Thinking of getting rid.

Not surprising. Any ideas what you'd buy to take its place in your portfolio?

I am rationalising all my investments - some that an IFA set up, plus some I did myself - manly VLS 40 plus some satellite funds (including this).  While this didn't do well, my other "punts" have done really well.  However, the are now outside my risk profile and I want a simpler portfolio.
I intend to keep the VLS40 and use this for 5-10 years out - And VLS 80 (or similar) for 10+ years out. Moving some to cash when I think the time is right to keep my 5 year float.