SLI Gars pulls ahead with bump from US bets

£10bn fund was the ninth best performer in the IA Targeted Absolute Return sector

Standard Life Investments’ troubled absolute return fund is pulling up from behind boosted by bets on US large caps and the UK stock market.

Over one month it returned 1.74%, making it the ninth best performer in the IA Targeted Absolute Return sector which returned a paltry 0.38%.

It is 41 out of 117 funds in the sector over one year, an improvement on its three-year track record where it did worse than a little over half the funds in IA Targeted Absolute Return.

3m6m1yr3yr
SLI Gars3.943.120.481.57
IA Targeted Absolute Return1.450.11-0.734.34
Source: FE Analytics

Gars boosted by US large cap

Investment director and multi-asset investment specialist David Bint said the fund benefited from its long US equities position as concerns around America’s trade war with China subsided and the Federal Reserve eased up on its quantitative tightening programme, as well as its positive exposure to UK equities and global oil companies.

Specifically its bet that US large caps would outperform US small caps proved fruitful. The S&P 500 ended the month up 1.20%, driven by better performance from tech giants like Apple and healthier than anticipated quarterly earnings from memory chip manufacturers, while America’s small cap index the Russell 2000, finished down 3.02%.

However, this rally worked against the fund in a separate bet that US equity large cap would top the broader technology sector.

In recent years the team behind Gars has made a series of bad predictions that have proved costly for performance and resulted in billions of pounds in outflows.

In a media briefing last year the managers admitted they prepped for the end of the equities cycle too early in 2015, the year the fund’s performance began to slip, and stuck to this position the following year in spite of the persistent bull market.

Gars’ spell of bad performance has put off investors in the fund. It has remained the biggest single source of outflows for parent company Standard Life Aberdeen which saw a total of £40bn worth of redemptions in 2018.

However some commentators have speculated that SLA’s victory in its dispute with Lloyds over a £109bn Scottish Widows contract could take some of the pressure off the mega fund.

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