Absolute return funds near record correlation to equities

New money pouring into the absolute return sector may not provide the protection investors are seeking, as data shows near-record correlations with long-only equity funds.

Investment Week reported earlier this month buyers have been revisiting long/short equity funds on fears of "brutal" sell-offs following earnings misses from prominent companies, a trend borne out by figures released two weeks ago by the Investment Management Association (IMA). The Targeted Absolute Return sector pulled in £343m of net inflows in January, its highest level since December 2009 and near double its monthly average over the previous 12 months. While investors are looking to diversify away from fully-valued equity markets, a number of prominent absolute return and hedge fu...