Over the past year, markets have seen a sea change. Gone are the days of hopeful talk of “global synchronised growth” and the continuation of the bull market; instead, there has been a return to volatility and growing fears of difficult times ahead. In the face of such bearish sentiment, should nervous investors think about returning their portfolios towards more defensive investments? The answer to that question depends to some extent on your timescale.
As interest rates rise and quantitative easing is withdrawn, stock and bond markets look set to lose an important support mechanism. Share prices may make further progress, but they are swimming against the tide. In this environment, fund investors may well be looking for an alternative to equity and bond funds, such as targeted absolute return funds.
Many targeted absolute return funds found themselves in deep water in 2016 and unable to deliver on their promises.
Pictet Asset Management has launched an unconstrained global absolute return bond fund.
The outcome of a review of the absolute return investment sector has been announced and will see it renamed as 'targeted absolute return'.
Investors’ confidence may be returning, according to figures that show sales of equity funds have outsold those of fixed income funds for the first time in 12 months.
The Investment Management Association (IMA) is to consult on changes to the absolute return sector, to consider grouping funds in a more meaningful way for investors.
Absolute return funds overpromise and under-deliver, the chief investment officer of Vanguard has warned.
Threadneedle has launched a European equity absolute return fund.
The absolute return sector is one of the newest and fastest-growing Investment Management Association fund categories, having expanded from 17 funds when it was set up in 2008 to 69 today. Of those, 13 have launched since the end of June 2010.