Knowing your way around absolute returns

Absolute return funds aim to make a gain in every market condition but not all of these vehicles operate in the same way, making it vital for advisers to understand how they are constructed.

Knowing what techniques are being used by the managers of these funds, and if they have the experience to use them is an important part of the due diligence involved. Many of these portfolios use similar techniques to a hedge fund but not all AR funds use the same ones. Some funds are managed on a market-neutral basis while others still are long/short in nature. Even those that say they are one thing, may in fact be doing something else altogether. The situation is not dissimilar to actively managed UK growth funds where the manager is in fact closet tracking the index. In the abso...