In the first quarter of 2020, broad measures of UK equity performance were down by about 25%. The manager of a UK equity fund which has that benchmark, and which was down by ‘only’ 20% over the same period therefore achieved very good performance, even though investors in that fund lost a lot of money. Managers of absolute return funds have no such place to hide. Their benchmark is cash which, unless you are in the eurozone or Switzerland but not so far in the UK, cannot deliver a negative return. Managers of absolute return funds are therefore aim to deliver positive returns in absolute terms over reasonable timeframes, irrespective of what is happening in stock or bond markets.

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