Standard Life Investment’s Global Absolute Return Strategies (Gars) was back in positive territory by the end of July, ending a successive losing streak of negative returns.
The £17.5bn absolute return fund returned 0.6% net of fees in the month to 31 July, according to its latest performance update. On a one month view the fund is now up 1.08%, data from FE Analytics shows.
Gars has lost investors money over one and three years versus unlike peers in the IA Targeted Absolute Return sector, which have average positive returns. Year-to-date it is down -3.48%.
| 1yr | 3yr | 5yr | |
| Standard Life Investments Global Absolute Return Strategies | -3.0% | -4.8% | 7.3% |
| IA Targeted Absolute Return | 0.4% | 4.5% | 12.0% |
Source: Trustnet
Gars recorded redemptions of £10.7bn in 2017, up from £4.3bn the year before.
The mega absolute return fund did not appear in FE’s top five most researched funds for the first time since launching in 2008.
US equity and European bank bets pay off
Performance was boosted by its equity positions in the US and Europe, as the S&P 500 and Euro Stoxx 600 took off during the month in spite of deteriorating trade relations between America and China.
Andy Ford investment director at Gars said the fund’s bets on US large cap versus small cap outperformance and European equity bank strategies particularly benefited in this environment.
But he said the team has decided to close the short Eurostoxx 50 leg in its European equity banks versus European equities strategy to “refine the balance of risk” in the portfolio.
“We felt that the position’s risk-return profile was likely to be impacted by widening peripheral Europe spreads, which in our view may be sustained by the evolving political environment in the region,” he said.
Mistiming on equities bull market end
The absolute return behemoth has made a series of bad predictions, which have dented performance. The managers prepped for the end of the equities bull market in 2015, the year the fund’s performance began to slip.
The fund’s recently added oil majors versus global equities position detracted from performance in July.
In July Gars exited its Korean equity strategy over concerns that recent global trade and growth developments would limit the scope for upside surprises in the medium-term.
The team also added a strategy which reflects the view that interest rate hikes in Canada are fully priced in, as well as a Brazilian government bond strategy based off their prediction that the country’s inflation and growth outlook will prevent rates from raising as quickly as markets anticipate.
