Bloxham: Absolute return funds ‘too correlated' to equities

Kevin McConnell, manager of Bloxham's outperforming Midas Global Absolute Return fund, has warned many of the UK's absolute return vehicles are too correlated to equity markets.

Bloxham said its fund’s correlation coefficient with the FTSE World index is 0.29, according to FE data for the year from January 2011. The two largest players in the absolute return space – Standard Life Investments’ £9.3bn GARS fund and Newton’s £5.2bn Real Return fund – have coefficients of 0.47 and 0.77, respectively. The IMA Absolute Return sector had a correlation of 0.83 over the same period. Newton said its strategy has a strong correlation to rising markets but a weak correlation to falling markets, while SLI said GARS had a lower correlation over three years. McConnell sa...