Santander seeks to exploit absolute return ‘capacity issues’

Toby Vaughan, head of fund management for global multi-asset solutions at Santander Asset Management, says the firm is seeking to exploit opportunities in the Targeted Absolute Return sector, as “high quality” funds come up against “capacity issues” amid strong investor demand.

In the latest FTAdviser video interview, Mr Vaughan notes: “We spend a lot of time focused on absolute return. That is a tactical view but it is also an interesting sector at the moment.

“It is not a huge sector. It is a sector that is developing and we are looking for specific types of funds and strategies there. Some of the higher quality funds in that sector are coming up against capacity issues.”

Article continues after advert

Revealing his firm’s sector focus against the backdrop of choppy markets, Mr Vaughan adds: “We still believe that equities can continue to out perform. It is very much targeted on specific sectors.

“We are still quite constructive on developed equities but particularly the US and Japanese equity markets. These are areas where we are overweight against our benchmark.”

On traditional government bonds, Mr Vaughan said his view was that this source of income deserves a place in portfolios but that his funds were less weighted in this type of bond than they have been previously.

He said: “We are less weighted to those than we have been in the past because while they have their diversification benefits, when you think about it from a returns perspective the UK government bond sector and index has delivered 5 per cent a year since the year 2000.

“Now the yield on 10-year government bonds is less than 2.3 per cent... the genuine return (now) gives nothing above inflation.”