Do Low Volatility Funds Deliver Positive Returns?

Much of the investor attention surrounding absolute return funds focuses on those with low volatility characteristics, but Argonaut's Barry Norris says they may not be worth paying for

Argonaut Capital 22 September, 2015 | 12:58AM
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This article is part of Morningstar's "Perspectives", written by third-party contributors. Here, Barry Norris, founder and CIO, Argonaut Capital, and manager of the Argonaut Absolute Return Fund, explains why low volatility absolute return funds many not be worth the money.

The argument for investing in absolute return should be relatively simple: a consistent delivery of attractive returns, combined with a risk profile offering diversification from traditional long only funds.

However, much of the investor attention surrounding absolute return strategies overly focuses on those funds displaying low volatility characteristics, which we argue by itself has no portfolio diversification benefits. We are concerned the emphasis on low volatility in isolation often leads too many funds to only deliver mediocre ‘cash plus’ returns – without the actual safety of cash.

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Argonaut Capital  is a London based asset manager which specialises in European equity products