Having the ability to keep your promises

Choices

Ultimately, as in any investment, choosing the right manager and the investment process is paramount. "It is far too much to expect the manager to make the right decisions all the time," Ms Cukic points out. "Some of them have undoubtedly not been making the right decisions, particularly in the fixed interest market. The only ability for absolute returns funds to make their Libor plus 1, 2 or 3 in every market is predicated on the simple assumption the manager is going to make the right decision."

"An absolute return product needs to be well tuned to the environment," adds Threadneedle's Mr Fitzsimmons. "You need to trust the fund manager to put in strategies that may not pay off that day or the day after, but over 18 months to two years. We all want to get it right every day."

The US has had far more experience of absolute return funds, and the UK investor is understandably wary of a new strategy that so far has yet to produce the numbers to back up its claims.

"Some people have also been buying it for the wrong reasons," adds Mr James. "It is an asset class that is here to stay for a long, long time."

For Mr Fitzsimmons it is a question of making sure the investor feels comfortable with the asset class. "There is a degree of education that has to be done," he argues. "When we have introduced people to our funds we have been at pains to take them through these strategies, which represent a very rich seam for the currency and fixed income markets, which is maybe what the normal investor is unable to perceive.

"Ultimately, using this type of structure and investment approach is a very rational way to play between the bond markets."

Hugo Greenhalgh is editor of Investment Adviser