3 Top Rated Absolute Return Funds

Morningstar fund analyst Randal Goldsmith picks three multi-asset funds that deploy alternative assets with success in their portfolios

Randal Goldsmith 16 December, 2016 | 3:46PM
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This article is part of Morningstar's Guide to Alternative Investing; providing everything you need to know about property, commodities, infrastructure and other diversifying assets. 

Newton Real Return

Morningstar Analyst Silver Rated

Newton Real Return is a strong choice for investors seeking a target-return multiasset fund with an emphasis on capital protection. 

Iain Stewart is among the most experienced multi-asset target-return managers in the United Kingdom, and he has run the fund since inception in April 2004. Before that, he managed traditional balanced and global-equity mandates based on Newton's theme-driven process and has around 30 years' experience in this style of investing. Stewart leads the real-return team of eight, which includes four other portfolio managers and an experienced strategist. The team constructs the Newton Real Return portfolio based on the in-house thematic view of the world and macroeconomic outlook. These are the central pillars that are reflected in sector positioning and stock selection in the fund. Indeed, there is a high commonality in the portfolio's holdings with other Newton funds. 

The fund targets one-month pound sterling Libor rate plus 4% gross annualised over five years with volatility in between that of equities and bonds. To achieve this, the mandate has full allocation flexibility across assets that can be accessed via tradable securities. In particular, the portfolio is divided between return-seeking assets – mainly equities, and stabilising assets – mainly bonds and cash, and the manager increases the latter when the team is cautious. A protective derivatives overlay, composed of option strategies, is also applied to limit downside on the return-seeking core. 

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
ASI Global Absolute Ret Strat R Acc78.83 GBP0.17Rating
BNY Mellon Real Return A GBP Inc129.97 GBP0.15Rating
Invesco Global Tgtd Rets UK Acc56.10 GBP0.02Rating

About Author

Randal Goldsmith  is a Manager Research Analyst with Morningstar.

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