Barry Norris’s Absolute fund doubles as track record builds

Argonaut’s Barry Norris has seen his European Absolute Return fund double in size in a matter of days after a series of retail clients decided to buy in.

The fund slumped from £10m when it was originally seeded in February 2009 to just £2.5m at end-June, but it now stands at £4.7m in size following a series of mostly intermediary inflows in July.

The fund was originally seeded when Argonaut was still a joint venture between Mr Norris, with colleague Olly Russ, and Ignis Asset Management.

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But it fell in size last year due to a combination of Ignis withdrawing its money and clients fretting about investing both in European markets and the controversial ‘absolute return’ concept.

Mr Norris said the latest surge in interest came as the strategy had built up a record of consistent positive performance regardless of market conditions.

“We’ve made money when the market returns have been negative and controlled our drawdown very well,” he said.

“We are generating returns on our long and short [negative bet] books.”

He said the fund generated returns of more than 3 per cent in June alone, in the same month as markets from government bonds to credit and equities fell indiscriminately across the board.

“The other main positive for this type of fund is if government bonds are no longer what people are going to buy when they are worried about the direction of the equity market they will have to allocate a lot more money to absolute return funds,” he said.

The fund gained more than 18 per cent in the past year and reports three-year returns of 30.5 per cent – better than its objective of gaining 5-8 per cent a year.

The surge in sales comes after the group recently hired a sales team for the first time since it split – or became operationally independent – from Ignis in 2011.

Mr Norris, however, cautioned that the fund had generated particularly good returns lately and investors should expect a more moderate performance from now on. “We wouldn’t expect that to go on forever. We are in a period of above average returns at the moment. We’re just generating more alpha but not taking more risk.”

Successful trades include a recent short bet on gold miners, with the fund taking between 50 and 80 per cent from most positions.

“At the start of the year 9 per cent of the portfolio was short gold stocks. Today we are 1.5 per cent short gold stocks,” he said.

“What we’ve shown ourselves to be good at, certainly in the last three years, is controlling the drawdown and making money in the short book.”

The fund is designed to charge a performance fee of 20 per cent on returns above 5 per cent a year, subject to a high water mark that prevents the fund from charging performance fees on making good past underperformance.

However, the group has not yet implemented the charge, in spite of the fund’s strong performance, as it aims to reach roughly £100m in assets in the fund before implementing the performance fee.