Do Absolute Return Funds Outperform?

Absolute return funds are a diverse bunch, with performance to match. Morningstar analysis reveals the winners and losers since the 2020 crash

James Gard 15 March, 2021 | 9:10AM
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Absolute return funds are designed to perform whatever the market conditions, and are often promoted as “all-weather” solution to market volatility. A year on from the coronavirus market crash, we have crunched the numbers on what has been a turbulent period for world stock and bond markets. How have these funds performed over this period?

Stress Tested

We last looked at absolute return funds in the immediate aftermath of the March sell-off and found that only in one in four managed to produce a positive return in the first quarter of 2020, a period that provided a severe test for even the most experienced and talented managers. A year on, we have looked at the same cohort of funds, those in the Investment Association Targeted Absolute Return category. Over a one-year period, performance has been mixed – 54 funds out of the 66 are in positive territory, while the rest are still down. The best performer on this measure by a long stretch was LF Brook Absolute Return Sterling I Acc with a gain of 58% (the next best fund was up 16%) and the worst was VT Woodhill UK Equity Strat Net Inc GBP with a loss of around 8%.

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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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About Author

James Gard  is content editor for Morningstar.co.uk