However, you try to dress this up the fund is complex. In simplest terms it uses a process called scientific active equity management to manage downside risk but at the same time aiming to deliver attractive returns
We are facing a different environment in which it is likely to challenge investors’ expectations of future returns. This is driven by the fallout of the global financial meltdown in 2008 where QE is coming to an end (or has come to an end), interest rates will remain lower for some time to come and inflation is expected to be low.
With this background analysts expect after inflation annual returns from cash to be flat, bonds between 0 and 2% and equities between 5 and 7% over the next 5 to 10 years. The challenge for investors is that cash and bonds are perceived to be low risk income producing assets. But with income being received from these asset classes, the capital in real terms will start to fall. Therefore more investors are realising that to generate income and capital growth they need to take more risk. But the reality is that they don’t want to do this because of the risk – catch 22!!
The financial market is responding to this need by developing a raft of different products to respond to this changing environment. Arguable one of the main funds available to retail investors in the UK is the SLI Global Absolute Return Strategy Fund but alternatives are appearing all the time from the likes of Invesco, Threadneedle, Premier, Aviva, GLG and many others.
For investors the strategies employed can be complex and in some cases for little perceived return. However, you could argue that some bond strategies are complex!
One new fund for UK retail investors is the BSF Global Long / Short Equity Fund. This fund was launched in the UK in 2014 but a version has been running in the US for a couple of years and overall BlackRock (who run the strategy) have been managing these strategies for a number of years.
In this update we talked to one of the members of the team to understand why their approach is different and why investors might consider this as an alternative to bonds, and some of the other options in the market.