PA ANALYSIS: Is bigger better when it comes to absolute return?

Added 10th May 2017

With many of the absolute return funds from the giant retailers struggling to provide consistency, is bigger really better in delivering the sector's objectives?

PA ANALYSIS: Is bigger better when it comes to absolute return?

In theory, the Investment Association’s Targeted Absolute Return sector is supposed to be a safe harbour for investors, aiming to deliver positive returns in any market conditions, says the trade body’s website, come rain or shine.

Like Theresa May’s mantra of the month, it promises to be “strong and stable.”

However, for many of the sector’s largest players, that has proved to be a far cry from reality.

The woes of mega-absolute return strategy GARS have been well-documented in recent years and have cost Standard Life Investments £bns in flows.

The £24bn SLI fund was producing negative returns at the start of the year and only managed to return 0.69% on a 12-month view, according to FE Analytics.

Other GARS-equivalent products from retailers like Aviva and Invesco Perpetual have similarly struggled.

But despite the stumbles from the sector’s retail giants, a number of funds from smaller outfits have proved more consistent over time.

At a roundtable discussion on Wednesday, Brooks Macdonald’s Jon Gumpel, pointed to an interesting trend in the sector.

Looking at the information ratio of funds in the sector, 65% of the top 15 performing TAR funds were from boutiques.

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