If equities or bonds tank, then so does in all likelihood your portfolio. Still, with professional investors seemingly still very nervous about the health of the global economy, sales of absolute return funds are through the roof.
The latest Investment Association stats show funds within the Targeted Absolute Return sector to have registered their best ever sales figures at £529m in April.
There are different perspectives on this, of course. The first is todays bull market is, as is oft said, the most mistrusted in history; the second that shrewd investors may have finally learnt some lessons from past cycles and are de-risking now on the view that markets will unlikely climb much further.
Beware the cynics
A third view perhaps is that absolute return funds have at last won over what was, you may remember, a very cynical public when they first started to gain some traction a few years back.
“Nothing more than an advertising gimmick,” said one noted commentator five years ago, while others were quick to jump on to any of the strategies which failed to deliver a positive return in any prolonged slump.
Of course, absolute return comes in many different flavours, and there will always be outliers, but on average the 84 constituents of the Targeted Absolute Return sector have largely behaved as they are supposed to.
Over five years, the average fund has delivered around 18% in a relatively steady straight line of ascent – much less volatile than equities.
