Drilling down into absolute return portfolios

ABSOLUTE RETURN

Steve Waddington, multi-asset fund manager at Insight Investment, examines different strategies used by absolute return vehicles and asks how they can meet investors' needs.

Absolute return funds aim to produce positive returns through all market conditions, unlike traditional benchmark-relative funds which aim to outperform an index or their peer group. Unfortunately, many absolute return funds have either failed to consistently produce positive returns or their returns have been highly volatile. The difficulty is absolute return strategies typically have two goals: to achieve positive returns and to avoid volatility. Traditionally, these goals have been seen as competing objectives, because targeting higher returns often leads to accepting higher ris...