The Absolute Return funds that fail to deliver

Laura Suter
28 January 2019

•        Only one Absolute Return fund delivered a positive return in each of the past three years
•        Four funds delivered losses in each of the past three years
•        £7.2bn has been invested in these so-called “safe haven” funds during that period
•        Absolute Return giant Standard Life GARS lost investors 6.5% since 2016

Laura Suter, personal finance analyst at investment platform AJ Bell, comments:

“So-called safe-haven funds have failed to deliver through the Brexit turmoil, with just one Absolute Return fund managing to deliver a positive return in each of the past three years. 

“In the three years over the Brexit process (2016 to 2019) just 64 absolute return funds out of 105 delivered a positive return. However, the three-year figures hide big volatility in the funds, and the only one to deliver a positive return in each of those three years was Natixis H2O MultiReturns. 

“The Natixis fund only scraped by in 2016 with a 0.1% return for the year. It returned 7.1% in 2017 and 10.4% last year. A total of 61 funds delivered a positive return in 2016 and 2017, but 2018 was the killer year, with only one of those funds managing to deliver a positive return.

“More alarmingly, four absolute return funds have handed investors a loss every year for the past three years: Insight Absolute Insight Currency, Kames UK Equity Absolute Return, Schroder European Equity Absolute Return and Threadneedle Absolute Return Bond.

“Investors have flooded into absolute return funds over the past few years, driven by worries about global market falls and the ongoing uncertainty over Brexit. Over the past three years £7.2bn has been invested in these so-called “safe haven” funds, which aim to make a positive return in all market conditions, taking the total sector amount invested in the funds to £72.1bn.

“The three-year performance figures over the Brexit market turmoil (below) highlight the vast disparity and volatility in absolute return funds and show that many are far from delivering in all market conditions. The worst performing fund, Argonaut Absolute Return, handed investors a 23% loss, while the best performer, Polar Capital UK Absolute Equity, has delivered a 57% return. Even the Polar Capital fund has not been for the faint-hearted, with some of the highest volatility in the sector.

“Some of the biggest funds have also disappointed investors, with the £12.6bn Standard Life Investment Global Absolute Return Strategies fund, which is seen as the pioneer of the sector, delivering a 6.5% loss over the three years. 

“The £11.6bn Invesco Global Targeted Returns fund has just beaten cash over three years, returning 0.7%, while the £4.9bn Aviva Investors Multi Strategy Target Return handed investors a 7.2% loss. In contrast, the £12.7bn Merian Global Equity Absolute Return fund, now the largest in the sector, has handed investors 6.2% over the three years, while Newton Real return returned 6.3%.”

Laura Suter
Personal Finance Analyst

Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.

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