According to the IMA’s latest data, its Absolute Return sector registered net retail sales of £334m in March, its highest total since the uncertain months of late 2009.
It’s always hard to make generalisations about the IMA Absolute Return sector because it combines such a hotchpotch of strategies, though long-short equity funds remain the most common variety, if not always the bestsellers.
Still, if we look at the performance of these retail-focused vehicles over a five-year period (during which time many of these funds were launched), the aggregate performance is encouraging.
Slow path upwards
An average total return of 17% over that time frame for the sector is not bad at all; not quite as high as the 37% return from the MSCI World, but nowhere near as volatile either. A nice, reasonably straight, slow path upwards is exactly what investors would want.
trueHowever, an average tells us only part of the story. Paths have differed greatly for some of the most talked about managers in the sector.
Over the past three years, Standard Life GARS and Newton Real Return have been among the winners, both in terms of performance and asset flows. Elsewhere, BlackRock UK Absolute Alpha and the Philip Gibbs-led Jupiter Absolute Return have struggled.
The acid test
Fund pickers have not been shy in populating their portfolios with multiple absolute return strategies invested across various asset classes.
The real acid test will come if the current equity rally marches on through the remained of this year – do managers risk sacrificing their short book in favour of chasing momentum, thus increasing their correlation with markets? Discipline is everything in this sector, and real talent is rewarded.
