New data reveals many absolute return funds aren’t living up to their promise
Thursday 31 Jan 2019 Author: Laura Suter

So-called safe-haven funds have failed to deliver through the Brexit turmoil, with just one absolute return fund managing to deliver a positive return in each of the past three years.

In the three years over the Brexit process (2016 to 2019) just 64 absolute return funds out of 105 have managed to deliver a positive return. However, the three-year figures hide big volatility in the funds, and only one has delivered a positive return in each of those three years: Natixis H2O MultiReturns (BFNXSF1).

However, the fund only scraped by in 2016 with a 0.1% return for the year. It returned 7.1% in 2017 and 10.4% last year.

A total of 61 funds delivered a positive return in 2016 and 2017, but 2018 was the killer year, with just the Natixis fund managing to deliver a positive return.

In contrast, four absolute return funds have handed investors a loss every year for the past three years: Insight Absolute Insight Currency (B3CLDK2), Kames UK Equity Absolute Return (B4XS804), Schroder European Equity Absolute Return (B39VWZ3) and Threadneedle Absolute Return Bond (B0L4TD6).

Investors have flooded into absolute return funds over the past few years, driven by worries about global market falls and the ongoing uncertainty over Brexit.

Over the past three years a total of £7.2bn has been invested in these types of funds, which aim to make a positive return in all market conditions, taking the total sector size to £72.1bn.

The performance figures over the three years of Brexit market turmoil highlight the vast disparity in absolute return funds, and that many are far from delivering in all market conditions.

The worst performing fund, Argonaut Absolute Return (B7FT1K7), handed investors a 23% loss, while the best performer, Polar Capital UK Absolute Equity (BQLDRR5), delivered a 57% return.

Some of the biggest funds in the sector have also disappointed investors, with the £12.6bn Standard Life Investment Global Absolute Return Strategies (B7K3T22), which is seen as the pioneer of the sector, delivering a 6.5% loss over the three years.

The £11.6bn Invesco Global Targeted Returns Fund (BJ04HL4) has just beaten cash over three years, returning 0.7%, while the £4.9bn Aviva Investors Multi Strategy Target Return (BMJ6DT2) handed investors a 7.2% loss.

In contrast, the £12.7bn Merian Global Equity Absolute Return Fund (BLP5SB3) handed investors 6.2% over the three years, while Newton Real Return (B7W3652) returned 6.3%.

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