We see the fund as a potential bond replacement fund with the aim to drive down the volatility to bond type levels but deliver returns at around 70 to 80% of equities.
The Standard Life Investments (SLI) Global Absolute Strategies (GARS) Fund was born out of the desire of their own staff pension scheme to manage scheme assets in a more effective way. The strategy itself was launched to market in 2008 but had been used by their pension scheme for a number of years prior to that.
Essentially the trustees of the pension scheme wanted a strategy which was not dependent on the rise and fall of the market and more importantly not dependent on single risk factors. In essence they wanted to hedge out market risk.
This dilemma is now faced by many investors where the bond bull market has come to an end. Investors can no longer expect the same level of returns and potentially there could be much greater volatility. Additionally as we have seen with equities significant price fluctuations are the nature of the beast and volatility is what investors hate – the swing in the value of their investments, particularly in a negative direction.
Therefore for investors who have concerns about excessive volatility this fund gives strong growth potential with much reduced price variations.
We see the fund as a potential bond replacement fund with the aim to drive down the volatility to bond type levels but deliver returns at around 70 to 80% of equities. The target return is cash plus 5% after charges. It has thus far been successful and the fund now has over £30 billion of assets.
Often these types of funds are seen as complex because of the many different strategies employed and investors avoid them for this reason. The fund is a blending of ideas which draw down on the management’s view of the world, and these are referred to as themes. They don’t mind which asset class or classes have the potential to deliver returns but concentrate on the impact on the overall risk and reward within the portfolio.