Unleashing the mysteries within absolute returns

The absolute return sector has proved popular with investors yet confusion remains over the scope, target returns and investment time horizon of absolute return strategies

Compared to relative strategies, where returns and success are measured by the performance of the fund versus a benchmark, absolute return strategies should firstly be judged by the sign in front of the fund performance statistics (+/-), and secondly by their ability to achieve a pre-defined target return. A few examples of descriptions from marketing materials illustrate the wide range of interpretations circulating in the market: 1. Absolute return strategies aim to deliver a specified target return above the risk-free rate, while protecting against capital losses in any short sub-pe...