Deep Dive: The role of absolute return funds

Essential in bad weather

Freddie Lait, CIO of Latitude Investment Management, dives into absolute return

There is a confusion about the role that funds in the absolute return sector should play in investors' portfolios.  As the name suggests, absolute return funds should generate returns throughout market cycle, helping portfolios achieve their overall return objectives, while diversifying the sources of those returns.  Asset allocation models built on the ‘mean-variance' framework formalised by Harry Markowitz are broken. This will be clearer to people once interest rates and bond yields begin to rise, but the fact is they are already driving many perverse outcomes and suboptimal alloca...