Absolute return? Absolute nonsense!
When I look at recent fund launches, I can see that there are a few key themes which have proved most popular of late.
1. Equity Income funds
While some of these are still UK-based, there are an increasing number which invest in more global regions, which certainly makes a more interesting opportunity, but the risk could catch some out.
2. China funds
I can’t even bring myself to make a comment on this theme, given the focus it gets. I will just say that there are too many funds and I have seen some worryingly high allocations.
3. Absolute return funds
Clearly you are not going to fall off your chair when I mention that a number of these funds may not be fit for purpose, as it is a story well told. However, there are some stats emerging now that (I feel) need revisiting. (Gee blog continues below)
There are currently 72 funds in the Absolute Return sector, 10% of which have been launched in the last twelve months. Of all the funds available in the sector, 50% have delivered a negative return in the last twelve months and the average is -0.03%. So clearly the investor isn’t winning.
While there are a very limited number of absolute return funds that are worth considering (and we are talking about approximately 5% of the sector) fund managers still think it is fine to keep launching new funds. This makes the sector ripe for consolidation and who benefits from that? Let’s just say it won’t be the investor.
But the conveyor belt shows no signs of stopping new launches, so if fund managers have to learn the hard way, by losing money themselves and not gaining any funds under management, so be it.
So can we stop supporting them? Please?
Philippa Gee is managing director of Philippa Gee Wealth Management.