Absolute return funds are on the up

The overall performance of absolute return funds has marginally improved since the IMA first started publishing detailed monthly performance data for the sector six months ago.

In May, the fund management trade body began publishing rolling 12-month performance data for funds in the IMA Targeted Absolute Return sector, in a bid to tighten up monitoring of the much-criticised peer group.

The data shows in how many 12-month periods each fund produced a loss over the course of the past three years.

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The data to the end of October shows 46 funds in the IMA Targeted Absolute Return sector have a maximum of 24 such periods, with 37 of those posting more positive periods than negative.

This compares with 34 in May, indicating that poor performance periods are starting to fall out of funds’ three-year track records.

In addition, separate research from Fitch Ratings reported that more than 70 per cent of funds posted positive performance in 2012 and 2013, “supported by more favourable market conditions”.

However, some funds are still struggling to post positive returns. The RWC Core Plus fund had the worst record in the IMA data, having registered a three-year loss of 1.9 per cent to the end of October and amassed 22 loss-making periods out of 24 in that time.

The fund was overhauled in August and September by new manager Davide Basile, following the departure of previous managers Stuart Frost and Peter Allwright.

RWC’s chief executive officer Dan Mannix said: “One of the overriding challenges for this fund was that performance had been pretty lacklustre and needed to be managed in a way which had a high probability of meeting its objective.

“It is early days but since the end of September we have seen an immediate impact on performance.”

Liontrust’s £10m European Absolute Return fund, managed by James Inglis-Jones and Samantha Gleave, recorded 19 loss-making 12-month periods in the past three years, the IMA data shows, which has resulted in a three-year total loss of 4.8 per cent as of the end of October.

Liontrust was unavailable for comment.

Seven funds have a record of no 12-month losses posted since this monitoring was started, including Insight’s £1.1bn Equity Market Neutral fund and the £863.5m CF Odey Absolute Return sector.

A further 11 funds produced fewer than five negative 12-month periods in the three years to the end of October, according to the IMA, including Standard Life Investments’ giant Global Absolute Return Strategies fund.