Lazard and Robeco today unveiled their latest launches in this lucrative space, with fund groups looking to deliver readymade solutions to those wealth managers and IFAs apprehensive about volatile markets.
2016 has been an exceptional year in many ways, with currency calls – often boiling down to choosing between a hedged or unhedged share class – arguably having a bigger impact on portfolios than allocating between countries, regions or sectors.
And with this week’s Fed decision and the latest dollar surge, it is clear the macro is likely to continue to hold sway in 2017 and beyond.
With outflows from equities and poor sentiment towards government bonds, it is clear the alternatives bucket has taken on even more importance in recent times.
The growing popularity of absolute return funds – particularly those with a multi-asset mandate – adds further complexity to asset allocation.
“One of the big lessons over the past 18 months to two years is that absolute return and hedge funds in the main are short-duration assets, and they have clearly underperformed as bond yields have been falling” says John Husselbee, head of multi-asset at Liontrust.
“The reason these funds are short-duration assets is because of their benchmarks, whether it is three-month Libor or a cash benchmark, which is as short duration as you can get.
“In an environment that has favoured long-duration assets, perhaps it is fair to say that absolute return funds haven’t done so well because the managers’ objective is to outperform short-duration assets. They haven’t played the role in portfolios that everyone expected them to do so”.
