How market neutral funds ‘reduce risk but retain returns'

Ian Heslop, manager of the Old Mutual Global Equity Absolute Return fund, explains why investors in volatile markets should focus on avoiding the lows, even if it means missing the highs.

Last year was extremely challenging for global equities. Many investors were wrong-footed in the early months by a series of non-financial events, including natural disasters in Australia and Japan and political unrest in the Middle East and North Africa, which impacted the price of oil. But it was ultimately the successive sovereign debt crises that roiled the eurozone that dominated markets in 2011. The effect was a ‘binary’ market, driven by day to day and week to week switches between the extremes of risk on and risk off. It proved an almost impossible market for mainstream fund...