Absolute returns

In most cases we manage portfolios on a relative return basis, with performance measured against market indices. The aim is to outperform the benchmark, even if it goes down in the short term, and we do not aim at a fixed return. This is in the belief that we do our job by picking stocks rather than trying to time the market.

This does assume a degree of tolerance for risk however, as markets are volatile and can take a number of years to recover from serious setbacks. We try to address this by being active investors rather than index trackers, but we appreciate that some clients would rather aim for a more defined return. In such cases we invest on an absolute return basis, with a benchmark derived from prevailing interest or inflation rates.

There are various ways to approach this. Bonds are a natural asset class and we are also familiar with hedge funds. We manage our own long-short UK equity fund and we have particular expertise in the area of gold and precious metals. Derivative backed funds offer exposure to equity markets and other asset classes such as commodities and can include performance guarantees, which are useful in such cases.

A typical absolute return portfolio will contain a mix of such assets and often foreign currency as well. Depending on the target return, an element of conventional equity exposure may be included, though there is inevitably a trade off between risk and return.

Contact us

For more information about absolute returns please contact a member of the team.