GAR Global Absolute Return Strategies

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monagt

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Why have these funds (example: Standard Life's 5yr perf is 15%) done so poorly compared to everything else?

I thought they were more resilient and reactive to market conditions than other funds.
 
monagt said:
Why have these funds (example: Standard Life's 5yr perf is 15%) done so poorly compared to everything else?

I thought they were more resilient and reactive to market conditions than other funds.
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If these guys could get it right every time they wouldn't need to be peddling the fund, would they??? In general these kind of funds try to target some unusual situation in the market to gain an edge, however once everyone is playing the same strategies there is no edge.
 
They don't aim to achieve the market return though. They aim for consistent returns with reduced volatility. And they have high charges.
 
"Absolute return funds" are better known as hedge funds and they promise (but certainly don't guarantee) to deliver a return (often expressed as cash +X%) regardless of the direction of any underlying market.

As Joe says, they ain't cheap and in my humble opinion have no place in any retail investor's portfolio.

Keep it simple - if you want to dial back the volatility of your portfolio just add more cash/bonds.
 
The GARS fund is a very complex fund. When they brought it out, they did a seminar on it that lasted a whole day. There are a lot of strategies going on within it, such as Swiss pharmaceuticals v German luxury goods. Each one on its own is deemed risky but when combined with the other strategies, the overall risk of the fund was reduced.

The fund was a runaway success when it was launched and took in massive amounts of money. It was claimed that it grew too big and any new investments were having negligible effects on the overall fund performance. It has certainly lost its shine and lost -3.74% last year.

As with a lot of these funds, they are launched with promises of making money in good times and bad. The stock market has performed very well since its launch so it hasn't really been tested in a high volatility market.

I echo what Sarenco said, keep it simple and repeat what I said in the Structured Bonds thread, if you don't understand it, don't invest your money.


Steven
www.bluewaterfp.ie
 
Sarenco said:
" Keep it simple - if you want to dial back the volatility of your portfolio just add more cash/bonds.
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With rates so low, inflation and admin fee the returns will be negative.

What are Bond Funds expected to return?
 
Well, the last time I checked the yield to maturity (the best predictor of future bond returns) of the Barclays Aggregate € Bond Index was around 0.5%, which is quite a bit higher than Irish inflation (CPI) at around 0.2%.

I'm not suggesting that bonds are going to give anybody a great return at current yields. Nor am I suggesting that current low bond yields don't reduce the diversifying effect of holding bonds in an equity heavy portfolio.

But what other options do you have to dampen equity volatility? Invest in expensive hedge funds (aka absolute return funds)?

Or just invest your entire net worth in riskier assets and hope for the best?
 
People have to stop chasing the magic investment. If cash deposit rates are low, they are low. If you want to get a better return, you have to take some investment risk. Likewise with bond yields. People also have to remember that bonds have an inverse relationship with interest rates, so if rates go up, bond yields will reduce further. This can have a big impact on long term bonds.

Equities should be seen as the main driver for growth. As Sarenco said, cash/ short term bonds should be used to dampen the volatility of your investment. For example, one equity portfolio I use, fell by -40% in 2008 and rose by over 70% the following year. Another portfolio with just 20% of that equity content and 80% bonds, fell by just -6% in 2008 but it has never really returned more than 4%. That's fine, because it's not supposed to earn double digit returns, if it is, it's taking more investment risk than it should.

Steven
www.bluewaterfp.ie
 
What about infrastructure assets?

i.e. the types of funds that receive rents for hospitals/prisons/clinics and divvy them out to investors
 
SBarrett said:
....People also have to remember that bonds have an inverse relationship with interest rates, so if rates go up, bond yields will reduce further. This can have a big impact on long term bonds.
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Hi Steven,

A little Friday morning banter....

In another thread, the Duke of Marmalade proposed a test whereby folk should be asked to write something in not more than 40 words and not less than 50 words. I think you have out-duked Duke with the above :D..............
 
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