Absolute return 'should have done better', says Thames River's Potter

31 January 2012 | By Gary Jackson

Using data from Lipper, the multi-manager specialist shows the average absolute return fund handed just 0.2% to investors over the fourth quarter of the year, making it the fifth worse performer of the IMA’s 36 sectors.

Gary Potter, co-head of the Thames River Multi-Capital team, says: “In a quarter that was generally not brilliant for returns and a year that was certainly not positive for equities, these funds ought to have done considerably better.

“You would expect them to underperform in strongly rising markets but the idea is that they hold up better when equities are struggling, which does not seem to have been the case during 2011.”

However, Potter also points out that the absolute return sector is still relatively young and populated with funds which have very different approaches to strategy, geography, positioning and investable universes. (article continues below)

Potter adds that none of the funds in the sector are “inherently incompetently run” in his team’s view, as 2011 was characterised by high levels of volatility and offered a difficult environment for even experienced asset managers.

Thames River Multi-Capital’s research shows the absolute return sector made an average loss of 2.4% in the third quarter of 2011 and posted a 1.2% fall for the entire year.

“After losing money in quarter three and for 2011 as a whole, we would like to see returns above cash at least from these funds to regenerate interest in what should be a very appealing sector in such volatile times,” Potter concludes.

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