Express. Home of the Daily and Sunday Express.
Savers warned about risks of absolute return funds
Older investors and pensioners may be putting their savings in jeopardy by investing in supposedly low-risk absolute return funds.
Millions of hard-pressed savers have been advised to invest in targeted absolute return funds, which aim to deliver a higher return than cash, but with less volatility than the stock market.
They are built to offer investors a positive return regardless of what happens to share prices.
They do so by investing in shares, bonds, cash, property andfinancialinstruments such as derivatives to produce a targeted return each year.
Savers seeking capital protection have flooded into these funds, making this one of the most popular investment sectors of all.
However, certified financial planner at Chase de Vere Patrick Connolly says some absolute return funds are sailing too close to the wind.
Out of more than 3,000 funds, three of last years four worst performers were in the targeted absolute return sector with investors suffering big losses, says Connolly: FP Argonaut Absolute Return lost 25.6 per cent,CF Odey Absolute Return lost 17.8 per cent and Old Mutual UK Opportunities lost 11.6 per cent. It is clear these funds are taking too many risks.
Connolly says it is astonishing that funds which aim to offer a positive return year after year can lose so much in such a short period: This is not what investors in this sector would expect.
FP Argonaut Absolute Returns disastrous 2016 performance followed three years of double-digit gains but Connolly says this is also a problem: While an investor might be happy with big gains, if a fund is taking that much risk it could also be liable to significant falls.
He says many pensioners and older people rely on the sector to provide capital protection and funds taking excessive risks should be stripped of absolute return status.
Connolly even suggests the absolute return sector should be scrapped altogether as the dangers are impossible to gauge: It is putting the financial interests of investment companies ahead of investors.
Mike Gordon, technical director at wealth managers Rutherford Wilkinson, says choppy performance shows that funds are failing to keep their promise of delivering returns regardless of what happens to the stock market: The clear disparity in performance highlights the range of strategies used, some of which are complicated and traditionally found only in the hedge fund industry.
Gordon says many funds perform really well in some periods yet miss their target in others: Given these extremes, they are definitely not doing what it says on the tin.
The largest fund in the sector, the huge 25billion Standard Life Global Absolute Return Strategies, fell 2 per cent last year, while the FTSE 100 gave a total return of around 20 per cent or 10 times as much
Gordon explains the struggling behemoth has an enormous array of different and complex strategies and this has hit performance: It makes far more sense to build a balanced, diversified portfolio of cash, bonds and investment funds to match your own attitude to risk.
Peter Griffin, investment director at advisers Gale & Phillipson, says some cautiously managed absolute return funds can be a useful way of reducing risk: We have used the Premier Defensive Growth Fund as a genuine alternative to cash and government bonds.
Make money from your bank account and improve your finances with these easy money saving hacks.
Martin Lewis: Money Saving Expert gives mortgage WARNING ahead of 2017
Martin Lewis: Get 5% interest on YOUR savings with Nationwide account
Melania Trump: FLOTUS savaged on Twitter for wearing outrageous outfit – Seriously?
BBC QT audience bursts into applause as Hartley-Brewer delivers critical blow to Remainers
North Korea shock: The secret weapon Kim is creating which could rival nuclear massacre
US-Syria crisis: Turkey confirms deaths of over 150 Kurds despite Trumps bold threat
Game of Thrones: Jon Snows true struggle to kill Daenerys revealed in axed scene
Stamp Duty: Where first-time buyers are least likely to pay the tax – is it your town?
State pension anger: 50s women devastated after abomination retirement age change
How much Universal Credit will I receive? Do you qualify for more than standard allowance?
Millions of UKs poorest pensioners getting least state support – could you claim more?
How state pension age changes for women have affected Winter Fuel Payment claims
Online banking warning: Avoid checking account in this situation to reduce hacker risk
Inheritance tax should be abolished! Doesnt the state take enough off us?! – poll
How former Pizza Express owner had roulette wheel in his investment firms boardroom
Inheritance tax: Australia scrapped it 40 years ago – heres what happened?
Tax poll: What do you think should happen to Inheritance Tax? VOTE HERE
Pension gap: Warning issued as state pension age changes for women court case is dismissed
Universal Credit: Could you get help from your energy supplier? Costs which may be covered
Boris Johnson urged to tear up tax code by IPSE chief: Its unsustainable!
How probate fee changes could see you pay thousands more – on top of any Inheritance Tax
Could you work beyond state pension age? Where people work beyond age 65 across world
Can Premium Bonds be bought as a gift? How rules have changed about buying for children
Junior ISA eligibility: How opening a JISA is affected by having a Child Trust Fund
Inheritance Tax particularly unpopular: Minister attacks fundamental unfairness of tax
Universal Credit & Pension Credit claimants could get 25 per week when weather turns cold
Retirement and me: Where is the justice? Meet the WASPI woman campaigning on wedding day
Tax relief: Why you may not be eligible to claim tax relief on job expenses
Online shopping: Easiest way fraudsters can lure you into costly scams online
Saving for your grandchild: What is a Junior ISA and can grandparents open an account?
State pension forecast: How to check how much you can get – and when you can claim payment
How is Universal Credit paid? When and where claimants can expect payment to be made
Insurance news: How to check if you are being penalised for car and home insurance loyalty
Insurance not working says FCA – home and car renewal price hikes face ban
Premium Bonds 1million winners unveiled – who tells you if youve won jackpot?
);$(.gig-button-container,commentIco).append($(spotCommentCounter .spot-im-replies-count).clone(!0));$(componentDiv .gig-share-bar-container
See todays front and back pages, download the newspaper, order back issues and use the historic Daily Express newspaper archive.
Copyright ©2019 Express Newspapers. Daily Express is a registered trademark. All rights reserved.
docViewTop)return self.shouldStick=!0elsereturn self.shouldStick=!1,checkIfInView:function()var mentKpiTracking.StartTimer() ExpressApp.CommentKpiTracking.SetIsInView(!0)elseif(that.isInView===!0)ExpressApp.CommentKpiTracking.StopTimer() ExpressApp.CommentKpiTracking.SetIsInView(!1),StartTimer:function()this.timeStart=ExpressApp.Helper.Now(),StopTimer:function()this.totalTime+=(ExpressApp.Helper.Now()-this.timeStart)/1000,RoundResults:function(seconds)return Math.round(seconds),sendResults:function(clickorunload)var that=this;ExpressApp.CommentKpiTracking.StopTimer();if(this.totalTime
0)if(typeof ga!==undefined)ga(send,event,Comments,spot_im,ExpressApp.CommentKpiTracking.RoundResults(that.totalTime),useBeacon:!0) ExpressApp.CommentKpiTracking.checkIfInView(),TrackNumberOfComments:function(number)window.utag_data.article.comments=number;if(typeof ga!==undefined)ga(send,event,Comments,count,number,useBeacon:!0) if(number
).addClass(reveal-modal reveal-dynamic GallerySlideshowModal videoModal).appendTo(body);var modalBody=ExpressApp.RelatedVideoModal.GetModalContent();console.log(modalBody:+modalBody);if(ExpressApp.RelatedVideoModal.modalWindow&&ExpressApp.RelatedVideoModal.modal.is(:visible))ExpressApp.RelatedVideoModal.modal.bind(reveal:closed.reveal,function()ExpressApp.RelatedVideoModal.modal.empty().html(modalBody).reveal()) ExpressApp.RelatedVideoModal.Listener();ExpressApp.RelatedVideoModal.modal.empty().html(modalBody).reveal(),ReplaceModalBody:function(modalBody)console.log(modalBody:+modalBody);ExpressApp.RelatedVideoModal.modal.empty().html(modalBody);if(ExpressApp.Brightcove.IO)var relatedVideoIOInterval=setInterval(function()ExpressApp.Log([IO],waiting for videojs to finish init process,!!ExpressApp.RelatedVideoModal.modal.find(video).id);if(ExpressApp.RelatedVideoModal.modal.find(video).id)ExpressApp.Brightcove.IO.restart();clearInterval(relatedVideoIOInterval),50),GetModalContent:function()console.log(modalBody:+ExpressApp.RelatedVideoModal.video);$.ajax(url:ExpressApp.RelatedVideoModal.video,dataType:html,success:function(data)ExpressApp.RelatedVideoModal.ReplaceModalBody(tmpl(tmpl-relatedvideo-slideshow,videoContent:data))),Listener:function()$(document).on(click,.GallerySlideshow [data-button=close],function()ExpressApp.RelatedVideoModal.modal.trigger(reveal:close);setTimeout(function()$(.videoModal).remove(),500)));function relatedVideosModal()$(document).on(click,.three-related-videos .Videos a,function(e)e.preventDefault();var url=$(this).attr(href);ExpressApp.RelatedVideoModal.Start(url)) function amazonProducts()ga(send,event,productWidget,view, a).click(function(e)ExpressApp.GoogleAnalytics.TrackEvent(productWidget,$(this).attr(href))) $(function()ExpressApp.CommentKpiTracking.TrackComments();ExpressApp.Gigya.checkCounters();ExpressApp.RelatedArticlesNewTab.AddTargetBlank();ExpressApp.ResponsiveIframe(singleArticle iframe:not([id^=ngxFrame]));relatedVideosModal();ExpressApp.OutbrainWidget.Init())