Run by the same multi-asset team behind the £20bn Global Absolute Return Strategies (GARS) fund, the new vehicle targets a punchy cash plus 7.5% return with expected volatility of around 6-12%. This compares to a cash plus 5% target from its bigger brother.
So what is new in this offering? And with such an ambitious target is it an absolute return fund?
For Stewart Smith, investment research manager at Rayner Spencer Mills Research, Global Focused Strategies appears to be very much a GARS Mk.2, though he questions if its more aggressive stance means the new fund will be more directional, and therefore subject to individual market moves.
A derivative call
“In GARS most of the strategies are accessed via derivatives, a very big and liquid market. Even though sometimes it might not directly 100% replicate what they are trying to do, by using derivatives it is certainly a more liquid and easier way to get out of the strategy as you have immediate liquidity.”
Like the shampoo isle at your local supermarket, the absolute return space has become defined by ever-increasing choice and, to some extent, sophistication and complexity. Smith talks of the whole absolute return sector as picking the “right strategy for the right situation”.
For Helen Farrow, director of fixed income at SLI rival Ignis (which fields its own multi-billion pound Absolute Return Government Bond Fund), too many multi-strategy funds became unstuck in 2013 because markets and asset classes have in the main become more correlated.
“Diversification doesn’t have to be by asset class, but it can be by theme or the subject that are focusing on so that you still maintain that when you get big market moves,” she says.
Absolutely bust?
“If you look at the whole concept of managing absolute return, it is as much about managing risk as it is about return and you really do need to control the downside and make sure that you don’t have any big negatives; getting a positive return regardless is quite hard to do if you’ve had big downside movements.”
From 130/30 funds through to long/short equity and now multi-strategy funds, the absolute return space has grown very large in a very short space of time. The question is, like the shampoo isle, is there now too much choice? This is something we will address in April edition of Portfolio Adviser, out soon.
