As the latest figures from the IMA show Absolute Return funds have seen their highest retail sales for over four years, Standard Life Investments' phenomenally successful Global Absolute Return Strategies (GARS) fund is starting to face more competition from peers.
A number of fund buyers have been looking to diversify their absolute return holdings into other products recently, after GARS swelled to £20bn.
Henderson’s multi-manager team prefers to invest in the Morgan Stanley Diversified Alpha Plus fund, which they said is less complex than GARS, and has produced strong performance with low correlation to markets.
Other investors, such as Charles Hepworth at GAM, have sold down the fund on concerns over its increasing asset base.
Hepworth (pictured) swapped GARS for the Odey Odyssey fund, claiming “the flexibility and nimbleness in that space is better served through a more boutique name”.
Ben Seager-Scott, senior research analyst at Bestinvest, said: “GARS uses a large number of discrete strategy ideas – this could be complemented, for example, by using a long-short equity fund, such as Threadneedle UK Absolute Return or Argonaut Absolute Return, which uses long and short ideas from across Europe.
“For those that prefer more multi-asset absolute return vehicles, there are a number of competitors to GARS that use a similar strategy. Insight’s Absolute Insight has established itself as a strong player in this area, using a more limited number of high conviction strategies to generate returns.”
The desire to find more nimble portfolios is now being reflected in fund flows.
Although GARS is still seeing net inflows, other absolute return and multi-asset products are also rapidly gathering assets.
According to data compiled for IFAonline sister title Investment Week by FE, GARS has attracted £1.4bn over the last six months. Meanwhile, Ignis’ Absolute Return Bond fund increased from £1.5bn at the end of September to £2.9bn by the end of February as investors looked for exposure to more specific absolute return areas.
While the Ignis’ fund is domiciled in Luxembourg, the most popular onshore fund after GARS remains Newton’s Real Return. Over the course of 2013, the fund gathered more than £1.5bn in assets, and has already seen inflows of over £300m in the last three months.
Meanwhile, Invesco Perpetual’s Global Targeted Returns strategy, launched by a trio of ex-GARS managers last year, has grown from £17m in September to £183m, with inflows picking up in the last three months. Of the smaller funds, Henderson UK Absolute Return stands out, having nearly doubled from £182m six months ago to £330m.
In the mixed investment sectors, Baring Multi Asset has seen inflows of around £255m to stand at £684m.
Competition in the sector continues as other firms are looking to take their share of inflows away from SLI’s product.
Aviva Investors is the latest to reveal plans to launch a low volatility multi-asset fund after poaching one of GARS’ founders Euan Munro.
The funds challenging GARS for market share are revealed below:
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