Given that most fund managers were set up for a more positive macro environment in 2020, including those in the absolute return sector, it is somewhat understandable why they have struggled, Paul says.
control email preferences and amend your account detailsStrategy,1st Floor,access your saved articles,has shrivelled down to a relatively paltry 3.7bn in size.So far this year investors have pulled 1.1bn thoughoutflows are down considerably from 2019.ASI Gars and Invesco Global Targeted Returns among the five funds that have racked up 6bn worth of redemptionsData from Morningstar prepared forPortfolio Adviserrevealedsome of the biggest behemoths in the sectorare now a shadow of their former selves after investorsrequested billions of pounds backamidthe pandemic.Receive the latest news and analysis relevant to UK wealth managers in our twice-daily emailsAfter a generally disappointing performanceduring crunch time and with equity markets on the rebound thanks to continued fiscal stimulus and,investment IFAs and other professional fund pickers and asset allocators in the UK and Channel Islands. No news.
Not included in the table is Ireland-domiciled Merian Global Equity Absolute Return fund which also saw a spate of redemptions with clients pulling 1.9bn, taking assets down to 1.1bn.
Chelsea Financial Services managing directorDarius McDermott puts continued investor pessimism toward the sector down to the mega funds not living up to their past glory.
Investors had been holding out hope that absolute return funds would be able to do what they say on the tinand protect capital as markets went into a free fall during the Covid sell-off between February and March.
Fleet House,and so in this regard performance has to be regarded as a disappointment,structure and specialism safeguard success for The JPMorgan Japanese Investment TrustBehind Gars,and then they didnt. And weve seen that happen time and time again.Outflows from the sector are partially down to the fact that 2020 hasbeen on average another dismal year for performance,Hovenden says.Home/Analysis/End of an era for mega absolute return funds as investors pull billions during Covid crisisDespite the negative attention around Gars mediocre performance,they give you negative returns,Baillie Gifford Diversified Growth fund (-13.9%) as well as Clunies fund (-12.7%). The worst performer,they said the strategy continues to see strong demandfrom US investors.But when,currencies and other asset classes,suggesting the sectors era of mega funds could be drawing to a close.Access full content on the Portfolio Adviser site,not only do they start to not give you positive returns,says Square Mile portfolio manager Charles Hovenden (pictured).See also:Invesco absolute return fund poised to overtake Gars for outflowsThere have been years some of these strategies have given us 7.
Similar to Gars the BNY Mellon Real Return fund has also delivered a positive return this year (5.0%). On a three and five-year view it has also generated substantially more than the sector, with returns of 17.1% and 26.0% respectively.
Absolute return funds with highest net outflows year-to-date
JamesClunies Jupiter Absolute Return fund, which started the yearat 1.2bn, is now down to a measly 180.4m afterbeing pummelled by 791.9m of redemptionsand poor performance. Clunies fund, which started out on the wrong foot this year after itsshort bet against Tesla soured as the stock tripled in value, is the worst performer in the IA Targeted Absolute Return sector year-to-date with losses of 20.1%.
He previously held Clunies Jupiter Absolute Return fund but sold out a year ago.Even before racking up double digit losses this yearafter itsshortsagainst Tesla and Scottish Mortgage backfired,McDermott saysthe fund was struggling.
They didnt deliver when they were meant to inQ1, and now nobody caresandthe stock markets going up forever.
Hovenden says the large exodus of investor money is unsurprising.That said,he continues. Instead they have the potential to,the Natixis H2O Multireturns fund,Merian Gears recent track record has been far worse. The fundhalved in size last yearfrom 13.4bn to 6.9bn during which time it handed investors a 13% loss. So far this year it has lost 5.5% while Gars is up 5.1%.Standard Life Investments Global Absolute Return Strategies,more recently,which as recently as 2017 was ranked as the UKs largest fund at 21.6bn,positive news about a Covid vaccine,says Chelsea Financial Services managing director Darius McDermott.See also:How have absolute return funds fared against Covid-19 volatility?Published by Last Word Media (UK) Limited,14 Bonhill Street,London,says Brewin Dolphin head of fund research Michael Paul.Portfolio Adviser is a monthly news magazine and daily news web site aimed at wealth managers ,EC1M 5LA. Copyright (c) 2019. All rights reserved. Company Reg. No. 05573633. VAT. No. 782 6511 15. ISSN 2397-284X. Registered office address,should the manager organise the portfolio for a more challenging outlook.59-61 Clerkenwell Road,you can understand why investors have left them.Brewin Dolpins Balanced portfolio currently has a 10% allocation to absolute return funds which is a neutral weighting relative to its benchmark.The Covid crisis was the first real opportunity the asset class had to prove its spots,London,lost 30.9%.That iscompletely unacceptable in this space,the BNY Mellon Real Return and Aviva Investors Multi-Strategy Target Return funds have leaked around 990m and 955m respectively.While UK investors have been pulling money out,9% percent in an uncorrelated way and thats what we wantand what we expected,
Invescos absolute return fund also boasts a worst track record, lagging the IA TAR average over all major time horizons, while Gars has only failed to beat the sector on a five-year view.
McDermott still ownsa decent proportion of absolute return funds in his portfolios including the Janus Henderson UKAbsolute Return fund, theTwentyFourAbsolute Return Credit and the Merian UK Specialist Equity fund, which is up11.8% year-to-date.
articles or content may be reproduced in part or in full without express permission of Portfolio Adviser.Hovendenit is virtually impossible forgo anywhere long/short funds likeGarswhich make binary macro calls on equities,8,BNY Mellons Multi-Asset Diversified Return (-14.5%),England,to be consistently right.Gars got it right for a time,Jupiter did not confirm whether Clunie is still shorting Tesla which is due to enter the S&P 500 later this year.Absolute return funds have been battered by a tide of redemptions during the coronavirus pandemic,very few of the funds are structurally likely to provide a positive outcome in these negative scenario,EC2A 4BXOf the funds that lost investors cash over the period around a quarterlost 10% or more. These included the Odey Absolute Return fund (-21.3%).
According to data from FE Fundinfo 88 out of 119 funds in the IA TAR sector fell in Q1 compared with just 23 that generated a positive return.
A spokesperson for BNY Mellon toldPortfolio Adviseroutflows from the fund followedbroader industry trends ofoutflows in diversified growth fundswith assets being reallocated into different areas.
Clunies valuation driven strategy which puts him long cheap UK assets and short growthy US stocks has so far failed to pay off. Though during the cyclical rotation over the past week off the back of the Pfizer/BioNTech and Moderna vaccine news, his fund has risen 3.1%.
The Invesco Global Targeted Returns strategyhas suffered the highest level of redemptions, with investors yanking 2.6bn so far this year.With 6.7bn in assets under management it is currently the UKs largest absolute return fund, though it has nearly halved in size fromlast June when it stood at11.2bn.