James Calder, research director at City Asset Management has also been bringing absolute return funds into portfolios, replacing long-only exposure in lower-risk portfolios with a mixture of long/short managers.
This includes “steady” funds in the form of Henderson UK Absolute Return and BlackRock Absolute Alpha, and the “more racy and active” Polar Capital UK Absolute Equity Fund.
Like Lowman, he stresses that the funds will not deliver in all market conditions: “They struggled in the February sell off – in that environment everything is going down unless you massively reduce the size of the book and use lots of index shorts.
“It would be difficult to ride that one out, but it will be interesting if markets start normalising how quickly they revert back to delivering the type of return you are expecting. There is no cast iron guarantee that these things won’t lose you any money but you have to hold them for a period of time to get the level of return that you want from them.”
Still, he stresses the big challenge for fund pickers is choosing strategies that are best placed to – if not guarantee growth – then at least limit some of the losses when the macro delivers us another curveball.
“It is very difficult to compare apples with apples in that pier group because it covers all absolute return funds and rarely do you get two long/short funds with a similar strategy; they all have slightly different mandates and managers doing different things.”
