The Standard Life Global Absolute Return Strategies (GARS) Fund provides investors with access to an absolute return fund that aims to outperform six-month sterling LIBOR
by five per cent per annum (gross of fees) over a rolling three-year period.

The fund is designed to exploit inefficiencies across markets and to maximise risk-adjusted returns from across the globe. It uses a combination of traditional investments, such as equities, bonds and foreign exchange, and advanced techniques including relative value, duration, credit spreads, inflation and volatility strategies.
This unit trust offers investors consistent, positive investment returns over the medium to long term in a variety of market conditions.

Minimum investment: £500 lump sum
Initial charge: 4%
Annual management charge: 1.5%
Contact: uk.standardlifeinvestments.com

James Davies,  investment research manager at Chartwell Investment Management, says:
With traditional asset classes such as equities, bonds and property all having
a tough time over the past couple of years, and equity markets in particular suffering under the heavy cloud of the credit crunch, absolute return funds are becoming more popular.

Before the rules governing UK collective investments were changed, allowing them a greater use of derivatives and alternative investments, absolute return strategies were the preserve of hedge funds. Now we are seeing a much wider use of investment powers being deployed by fund managers.

Standard Life Investments’ new GARS fund looks to employ the same strategy it has been running for some of its institutional clients since late 2005. Using equities, bonds, property and currency as the principal ‘physical’ assets, GARS also uses derivative instruments to limit volatility and portfolio risk and to maximise opportunity. The use of derivative structures ensures an element of portfolio liquidity.

The fund will invest solely in Standard Life Investments funds, where it holds physical assets (i.e. non-derivative). Although the fund has freedom to hold investments from other fund managers, Standard Life is confident in its range of expertise across different sectors to handle the management in-house. While I admire its conviction in its own fund managers and analysts, I would prefer to see more recognition of the value of holding non-Standard Life investments, but perhaps this is a matter of personal preference, as the in-house approach invariably results in lower charges.

In general, I am supportive of absolute return funds. I think that most investors want returns that are better than cash, but still capable of holding their heads above water during tough times. The proliferation of absolute return funds, however, does make me a little nervous. As always, there will be those who will be good at doing what they say they’re doing; and others who’ll hide behind what the rest of the market is doing,
until it moves against them and it’s apparent they weren’t quite as competent. I believe the GARS fund sits in the first category, as one of the factors I look for when assessing funds is the degree to which any fund launch is totally new, or the natural extension of an existing process. The process that GARS uses has been run for its institutional clients for 18 months or so.

Not all absolute return funds are the same, and my personal view is that ‘cash plus’ is a better description of what this fund is looking to achieve than ‘absolute’. Nonetheless, my overall view of this fund is very positive; it is worth consideration by investors looking for a diversified global fund, capable of delivering returns above cash.

4 Stars