Targeted Absolute Return has been the bestselling retail sector four consecutive months, according to the latest data (to end January) from the Investment Association.
Still, despite their popularity, investment director Beaney labels many of these funds a “fad” in the same vein as their predecessors in the dying hedge funds industry.
“It’s the fastest growing IA sector, but it will soon become the fastest shrinking one,” he said.
“Absolute return is a wonderful concept, but it is a marketing-led strategy. They use the same tools we have, but there are more restrictions on how much you can short within Ucits. Like funds of funds, you are relying on managers to get the asset allocation right.”
Beaney stressed that the “nirvana” that investors are looking for in terms of good returns and no risk does not exist.
“Ratings agencies are giving absolute return funds the biggest downgrades, and when retail investors are rushing into a sector, it is pretty near the top.”
He added: “Long/short managers are either right or wrong. Newton is one that has got it right, but few get it right year after year.”
