The balanced fund diet: Staying 'active' with a mix of strategies could improve your portfolio's health

Deep Dive into absolute return

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Mike Coop of Morningstar Investment Management Europe
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Mike Coop of Morningstar Investment Management Europe

The basic concept behind absolute return funds is very appealing: decent positive returns, low risk of loss and diversification versus equities and bonds.

More recently, they have been sold as bond substitutes: lower risk than equities, higher returns than bonds, less downside if there is a rise in bond yields. It is not a new idea; many were launched in 2009-2010 after bond yields fell to low levels, and in 2003-2004.   What are you buying? They are a broad group of strategies covering the following: 1. Multi-asset with low net equity exposures, concentrated portfolios and active use of derivatives.  2. Single asset class, usually bonds, with some exposure to currencies and higher risk debt to boost returns. 3. Diversified a...

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