Advisers need greater education on absolute return sector
Speaking at a Cofunds roundtable on absolute return funds, industry experts said it was the responsibility of asset management companies to educate investors.
Nick Osborne, co-manager of the BlackRock UK Absolute Return fund, said: “The absolute return sector has the ability to offer good diversification, particularly for investors who are looking for an investment experience with lower volatility.
“As the sector has grown, the onus is on fund managers to explain to our clients how this asset class can help meet their investment objectives.”
Richard Batty, investment strategist for Standard Life Investments, agreed. He said: “We have educated 2000 IFAs on what absolute return investing is, to get them comfortable with what it can provide. If we are offering new ways of investing to new customers, we should be educating them.”
Stephen Walker, head of equities research for London-based Ashcourt Rowan, argued that the sector needed to be split up because it was too diverse and confusing for investors who don’t understand what the funds do.
He said: “We would like to see the sector split so that investors understand that when markets become volatile, so too will some of the funds.”
Last year more than half of absolute return funds lost money. Mr Osborne said this was because fund managers had been “seduced by equity valuations”.
Nelson Pallister, senior adviser for Kent-based Booth Wealth Management, said: “I’m a bit distrustful of absolute return funds because they haven’t delivered what they promise to do and have gone down when they were not supposed to. They need to be treated carefully.”