A top player in the ‘absolute return’ fund world has called for his rivals to get kicked out of the IMA’s Targeted Absolute Return sector if they consistently fail to deliver positive returns.
Luke Newman, manager of the £406m Henderson UK Absolute Return fund, said it was time for the Investment Management Association (IMA) to eject funds that lose money time and time again.
The call represents the first time a major sector member has called for the sector’s policy to be hardened.
The IMA’s Targeted Absolute Return sector comprises 68 funds that aim to deliver positive returns, regardless of global market conditions.
Mr Newman said the sector was one of his major “bugbears” because some funds failed to use enough ‘short’ positions – bets that shares will fall – to neutralise investors’ exposure to market dips.
“There are too many long/short funds that are operating as long-only funds and that is not what investors are looking for from that sector,” he said.
Within its UK Equity Income sector, the fund management trade body regularly expels funds that fall short of the yield requirements, but it has so far baulked at such a move within its Targeted Absolute Return sector.
This is in spite of the fact the sector has proved controversial in the past, as many of its funds were discredited during the credit crunch after losing millions of pounds of investors’ money.
