SVM absolute return fund keeps strategy amid losses
Underperforming absolute return fund to retain its current approach in spite of high drawdowns.
SVM will not change the approach of its UK Absolute Alpha fund in spite of recent losses, managing director Colin McLean has said.
The £2.5m fund, managed by Mr McLean and deputy manager Neil Veitch, aims to outperform cash – as measured by three-month Libor rates – over one and three years, as well as aiming to “beat the equity market over a full cycle”.
However, the fund has significantly underperformed all three of these targets.
Over 12 months to August 15, the fund lost 18.2 per cent compared with a 1 per cent return from its cash benchmark, according to FE.
The fund lost 27.7 per cent over three years, while the return from its cash benchmark came in at 2.5 per cent. Over the same period the FTSE 100 index rose by 37.8 per cent.
For both one and three year periods the fund was the worst performing in the IMA Absolute Return sector.
Mr McLean said SVM keeps all funds under review, but said no changes would be made to the UK Absolute Alpha fund based on a “short term judgement” as it had not yet been running for a full market cycle, having been launched in March 2009.
He added that the absolute return sector had been out of favour recently, and this was reflected in the fund’s size.
Richard Troue, investment analyst at Hargreaves Lansdown, said: “The performance has been particularly bad, especially for an absolute return fund.
“You would certainly expect a degree of protection in falling markets, and it hasn’t benefited from rising markets either.
“It’s never good to see funds close because it is not an ideal situation for investors, but when the fund has been so bad for so long you have to start asking questions.”