Standard Life Investment’s Global Absolute Return Strategies last month delivered its worst period of performance this year as volatility wreaked havoc on global stock markets.
The £15.2bn fund sunk back into negative territory in October, returning -2.3% net of fees, according to a monthly performance update from the fund team.
The giant absolute return strategy showed signs of staging a recovery over the summer when it finally broke its losing streak of negative returns in July. But it struggled to hold on to these gains in the following months, returning -0.75% in August and 0.14% in September.
Gars continues to lag peers in the IA Targeted Absolute Return sector over one, three and five years. Year-to-date the strategy is down 5.77%, according to FE Analytics.
SLI Gars performance
|Standard Life Investments Global Absolute Return Strategies
|IA Targeted Absolute Return
Stung by US equities exposure
Commenting on the strategy’s dip in performance Aberdeen Standard Investments investment director and multi-asset specialist David Bint explained “October was a challenging month for capital markets.”
“Global equities fell in volatile trading, buffeted by rising fears around global economic growth, slowdown in China, elevated global trade tensions, as well as rising interest rates to some extent,” he said.
In particular Bint said the portfolio’s “broad US equity position” hampered performance over the period.
The S&P 500 and Russell 2000 indices lost 6.9% and 10.9% respectively in October, he noted.
The group’s exposure to global oil majors also hurt the fund as the price of Brent crude sank to $75 per barrel at the end of the month on the back of fears of a supply glut.
Buoyed by Bolsonaro
However, Bint said the group’s US equity large versus small cap strategy contributed positively to performance as did its long bets on the US dollar against the euro and Korean won and its long Japanese yen versus Australian dollar currency pair.
It also received a boost from its Brazilian government bonds strategy amid rising optimism in the country following Jair Bolsonaro’s victory in the 2018 general election.
This in turn hurt the fund’s emerging markets versus Brazilian equity relative value proposition.
Last week it was announced that Gars boss Guy Stern would be replaced by Schroders Europe multi-asset head Aymeric Forest.
Commentators told Portfolio Adviser the changing of the guard could be a valuable opportunity for Gars to regroup and sway negative public opinion about the strategy following a continued string of disappointing performance.
Between May and September Gars has seen total assets shrink by £2.7bn, falling from £17.9bn to its current £15.2bn.