How to invest in absolute return sector funds in falling markets

Is the decade-long bull market coming to an end?

Investors are nervous and perhaps they have every reason to be. A decade-long bull market appears to be stuttering, global growth is slowing and political tensions are worsening. In such an environment, it can be hard to know where to turn. In the investment companies market, many investors have been putting their faith in a select group of funds with an absolute return focus in the Association of Investment Companies' Flexible Investment sector. However, these funds are taking different approaches to riding out the oncoming storm.

In the wake of the Global Financial Crisis, central banks slashed interest rates and embarked on a programme of stimulus. The effect was to drive up asset prices across the board, leaving them vulnerable to a correction. The managers of these absolute return funds are faced with a difficult task. Inflation may be subdued but is still present; holding cash could mean accepting negative real returns. The same is true of high-quality government bonds. Each of these funds retains some exposure to equity markets. JPMorgan Multi Asset Trust (MATE) is at the high end of equity exposure with 59%...