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Absolute return is an absolute must

Outlooks & Research

 

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Absolute return is an absolute must is the title of this new white paper written at a time when traditional fixed income strategies and indices have become sources of ‘return-free’ risk.

Reflationary expectations and risk of inflation upside may have expedited the bear market for bonds and aggravated the challenges facing conventional fixed income investment strategies

In this environment, the case for absolute return strategies seems stronger than ever.

Absolute return strategies are doing what traditional fixed income was meant to do, that is

  • Generating income: Their flexible, long/short approach is designed to generate returns in a rising rate environment
  • Increasing diversification: These strategies are derived from fixed income and yet are completely uncorrelated to fixed income and other market betas
  • Providing stability: Robust risk management and portfolio construction practices where no one theme, sector, style or strategy dominates.

Absolute return strategies are therefore an absolute must in portfolios designed to tackle investing in the post-COVID economy.


Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.

Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).

Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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