Lack of Suitable Funds

7/31/2019 Lack of Suitable Funds

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News Release from Informed Choice

T: 01483 274566 I F: 01483 274640 I W: www.icl-ifa.co.uk

Informed Choice Ltd, Sundial House, 20 High St, Cranleigh, Surrey, GU6 8AE

Informed Choice Ltd is Authorised and Regulated by the Financial Services Authority © Informed Choice Ltd 2012

New Research Highlights Lack of Suitable Absolute Return Funds

27th July 2012

A new piece of research carried out by Informed Choice, the award-winning firm of Chartered

Financial Planners, has revealed the lack of suitable funds for investors to consider in the IMA

Absolute Return sector.

Informed Choice reviewed all 51 funds in the sector by applying its unique quantitative screening

model, discovering that only three funds scored above their 80% minimum threshold for fund

suitability.

Henderson Credit Alpha (92%), Insight Absolute Insight (81%) and Newton Real Return (80%) were

the three funds to receive acceptable quantitative scores, representing less than 6% of the total

number of funds in the sector.

The majority (67%) of funds in the Absolute Return sector received a score of less than half the

maximum possible, when factors including consistency and cost were reviewed.

Informed Choice chartered financial planner Martin Bamford commented:

“Absolute return funds are regularly criticised for their poor performance and high costs. This

research demonstrates that criticism is justified for the vast majority of funds in the sector.

“Our fund selection process seeks to identify funds that demonstrate consistent risk managed returns

combined with low total expense ratios. Absolute return funds have never been a comfortable fit with

our investment philosophy at Informed Choice, and this research shows that they offer very little

that should attract investors.”

Absolute return funds use a variety of strategies in order to target real returns regardless of market

conditions. They often appeal to investors during periods of stock market volatility, in the belief that

they can profit from falling or rising markets.

Continued on next page…







Bamford continued:

“So far this year we have seen regular bouts of stock market volatility as fears over the eurozonesovereign debt crisis continue. Absolute return funds should have been able to profit from these

trading conditions, yet they fail to deliver consistent risk adjusted returns.

“Investors need to think very carefully before including absolute return funds in their portfolios.

Failure to perform and high costs make them a less appealing option than a well constructed and

regularly reviewed portfolio of suitable funds.”

The study revealed that two-thirds of the funds in the Absolute Return sector have a Total Expense

Ratio (TER) of 1.6% or above. A quarter of the funds have TERs exceeding 2% per annum.

From 31st December 2012, financial advisers will need to consider the whole range of retail

investment products in order to remain independent. This independent status will be unaffected if

they choose not to recommend certain investment products because they determine they are

unsuitable for their clients.

Bamford commented:

“Independence is important to ensure investors get the best advice once the Retail Distribution

Review is implemented. What independence should never mean is that unsuitable investment funds

are recommended simply to prove the whole range of retail investment products is being used.”

Informed Choice regularly reviews the entire universe of funds and applies its research criteria to

identify those funds most likely to deliver consistent performance. The quantitative screening process

is used to identify funds with suitable attributes, before further qualitative research is conducted to

finalise recommendations.








Notes for editors

Informed Choice is an award-winning firm of Chartered Financial Planners, authorised and

regulated by the Financial Services Authority. Our head office is in Cranleigh, Surrey and

our Financial Planners are located across the UK.

Managing Director and chartered financial planner Martin Bamford is responsible for

investment research at Informed Choice and is author of Brilliant Investing; What the

Best Investors Know, Say and Do (Prentice Hall, 2007).

Informed Choice works with over 500 clients managing total investment assets of £115m.

For more information and high resolution photographs, please visit our media centre at

www.icl-ifa.co.uk/resources/newsroom or call Martin on 01483 274566, or email him at

[email protected].








Informed Choice Absolute Return Research

This analysis was conducted on Friday 27th July 2012 using the Informed Choice Fund Selection quant screen.

The research considered all 51 open funds in the IMA Absolute Return sector.

Position Fund name Score

1 Henderson Credit Alpha 92%

2 Insight Absolute Insight 81%

3 Newton Real Return 80%

4 Standard Life Investments Global Absolute Return Strategies 74%

5 CF Odey UK Absolute Return 71%

6 Threadneedle Credit Opportunities 67%

7 MFM CPI Defensive Managed 65%

8 Schroder Absolute Return Bond 63%

9 SWIP Absolute Return Bond 60%

10 BlackRock European Absolute Alpha 59%

11 Scot Wid HIFML Absolute Return 59%

12 Ignis Argonaut European Absolute Return 59%

13 Threadneedle Absolute Return Bond 58%

14 CF Miton Arcturus 52%

15 Henderson Emerging Market Debt Absolute Return 52%

16 S&W The Tenax 51%

17 Cazenove UK Absolute Target 50%18 Henderson MultiManager Absolute Return 47%

19 Insight Diversified Target Return 44%

20 Henderson European Absolute Return 42%

21 CF Octopus Absolute Return 40%

22 CF Absolute Return Cautious Multi Asset 39%

23 L&G UK Absolute 39%

24 Baring Absolute Return Global Bond 39%

25 BlackRock UK Absolute Alpha 38%

26 CF Eclectica Absolute Macro 37%

27 Kames UK Equity Absolute Return 36%

28 Jupiter Absolute Return 34%

29 Cazenove Absolute UK Dynamic 33%

30 Threadneedle UK Absolute Alpha 32%

31 Premier Defensive Growth 30%







32 S&W Saltus Multi Asset Class 28%

33 Liontrust European Absolute Return 26%

34 Skandia Alternative Investments Hedged 25%

35 Valu-Trac icf Absolute Return Portfolio 22%

36 L&G European Absolute 22%

37 IM Octopus Alternative Strategies 20%

38 WAY Absolute Return Portfolio 20%

39 Elite LJ Absolute Return Portfolio 19%

40 IFSL Acumen Defensive Portfolio 18%

41 SVM UK Absolute Alpha 18%

42 JPM Global Equity Absolute Alpha 17%

43 CF Turcan Connell Absolute Return Portfolio 17%

44 Henderson Japan Absolute Return 17%

45 Global Trend 15%

46 Aviva Inv UK Absolute Return 15%

47 IFSL Barclays RADAR 15%

48 IM Octopus Global Strategies 14%

49 SJP UK Absolute Return 14%

50 EFA OPM Diversified Target Return 13%

51 BlackRock Absolute Return Bond 12%

Please note that this research should not be used as the basis for making any investment decision. Investors

should consider a range of qualitative factors before investing, and ensure that any investments are suitablebased on their personal circumstances, goals and objectives. If in doubt, seek independent financial advice.

Past performance is not necessarily a reliable guide to future investment returns. The value of these funds can

go down as well as up.

Lack of Suitable Funds

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