Absolute Return Funds
Post the near colapse of Basis Capital in Australia - the manager of Basis Yield Fund & Basis Australia Opportunity Fund the question is - what timeframe of negative returns is enough for investors to be concerned?
This question posed to industry commentators suggests the timeframe must be shorter than that applied to a standard equities product. Consensus suggests negative returns over a few months would be sufficient to raise concerns!
Essentially these funds have been promoted to provide an absolute return or positive return & if thinking of a 2-3 month period then capital return should be positive over this timeframe. Investors should be wary if losses of 1-2 per cent are experienced in this timeframe.
Overall investors should keep asset allocation to around 5% of total portfolio. Performance over 1,2 and 3 years suggests absolute return funds are not seen as the solution across all market conditions and fluctuations.