Top 5/Bottom 5: Targeted Absolute Return

The absolute return label has historically been called misleading. To resolve this, the IMA this year announced it was to review, rename and redefine the sector. First announced in May 2011 and after numerous delays, the Targeted Absolute Return sector came into effect as of 1 June this year.

Removing references to a typical 12-month timeframe, funds now have a minimum requirement they must target in any given market environment. The IMA says funds in the sector must clearly state a timeframe in which they aim to meet their objectives to make a clear distinction between peers, however it can be no longer than three years.

Firms had the option to either change their fund mandate or leave the sector by 20 May. Funds from Aviva Investors, BNY Mellon, Carmignac Gestion, Henderson and Polar Capital either chose not to meet the new requirements or were forced out of the sector by the trade body.

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But the name change has not deterred investors. The Targeted Absolute Return sector saw net retail sales of £255m in May this year – well above its average for the past 12 months of £97m per month.

The Table below shows the sector’s top and bottom five performing funds based on an initial £1,000 over one year to 22 July. The CF Odey Absolute Return fund saw the biggest return on an initial investment, £1,489 over one year. However, not all funds were as successful. The GLG EM Equity Alternative fund saw its investment fall to £925 over one year.

Elsewhere,the Jupiter Absolute Return saw its initial investment over one year dip to £984. The fund is currently managed by Philip Gibbs, who announced last week he will retire in 2014. It will be managed by Mr Gibbs until 1 September when former SWIP manager James Clunie will take over.

Best And Worst Targeted Absolute Return Funds One Year To 22 July 2013
Top 5
CF Odey Absolute Return R GBP£1,489
City Financial UK Equity A Acc£1,245
Henderson European Absolute Return A Acc£1,190
Cazenove Absolute UK Dynamic P1£1,180
GLG Alpha Select Alternative DN GBP£1,154
Bottom 5
Jupiter Absolute Return£984
BlackRock UK Absolute Alpha P£982
CF Eclectica Absolute Macro A Net GBP£943
GLG EM Currency & Fixed Inc Alt DN H GBP£937
GLG EM Equity Alternative DL H GBP£925
Sector average£1,064
Figures as at 22 July 2013, based on £1,000 initial investment. Source: Morningstar