Trusts to protect you when absolute return funds can't?

Fletchsmile
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Trusts to protect you when absolute return funds can't? Feb 20, 2019 12:36:11 GMT 7

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Post by Fletchsmile on Feb 20, 2019 12:36:11 GMT 7

I was interested in this question, as I've held absolute funds in the past. The idea appeals, but the practice never seems to live up. Hence why such holdings are in the past for me now. Still interested in ideas that could address this though.

Wasn't particularly impressed with the suggestions/ solutions offered. Anyone else hold anything that might address the question?

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Will these trusts help protect you when absolute return funds can’t?

www.trustnet.com/news/2266970/will-these-trusts-help-protect-you-when-absolute-return-funds-cant

The downturn in markets at the end of last year highlighted the limitations of some absolute return funds when all assets fall at the same time, but there are some uncorrelated strategies in the closed-ended space that could provide some safety, according to Kepler Trust Intelligence.

In December, equities sold off against a backdrop of renewed friction between the US and China over trade and uncertainty caused by the Federal Reserve’s rate-hiking programme. Fears of a potential recession in the US and the end of the cycle added to equity market woes.

While many investors would usually turn to government bonds in such circumstances, there have been few signs that they can provide extra safety.

Fletchsmile, 13th of the Istari wizards - Wandered Middle Earth for centuries and chose Thailand.
Later discovered BigMango forum Thailand: bigmango.boards.net/ and www.bigmango.club
"Do not meddle in the affairs of wizards, for they are subtle and quick to anger" (LOTR)

Fletchsmile
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Trusts to protect you when absolute return funds can't? Feb 20, 2019 13:03:26 GMT 7

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Post by Fletchsmile on Feb 20, 2019 13:03:26 GMT 7

Of the suggestions:

BH Macro and BH Global.
- Really not clear what it actually invests in. Feeder funds for Brevan Howard master funds. Who? LOL

Though it did seem to have a good year last year = up over 30%\

Ruffer Investment Company
www.trustnet.com/factsheets/t/i009/ruffer-investment-company-ltd-red-ptg-pref
Have looked at this a few times over the years. In recent years seems less incentive to invest in it than ever. I'd rather hold a good THB deposit account
- It seemed to have been trading at or close to a premium for ages. Couldn't really understand why. But looks like investors are realising its consistent poor performance now and in 2019 switched to a discount

- Around half of the funds is invested in inflation linked bonds. As mentioned on other threads, someone would do better just buying an index fund for that 50%-ish and probably a global equity tracker for the remainder

- Annual management fee of 1% and OCF of 1.18%. So fees seem on the high side. When you consider what it actually invests in those fees are outrageous. As mentioned on the thread about inflation linked bonds there are ETFs and funds investing in inflation linked bonds with fees of 0.07% - 0.15% in a tracker. Doesn't look like RICA are adding any value whatsoever in that area. Just costing you 1.18% for the half of the funds in index linked instead of 0.07%-0.15% !

If you buy it you're not exactly paying for outperformace either:

> 5 year share price total return of 7.7%. That's cumulative not annualised! Annualised is just over 1% a year. (Think THB deposits again LOL

) NAV has fared a little better at 12.7% cumulative or just over 2% a year. Nothing short of abysmal
The article states:

“Ruffer takes a cash-relative benchmark common to the absolute return and hedge fund sectors, aiming to beat cash without losing money over any 12-month rolling period,” said the analyst. “The trust is, however, more committed to a single view of the world than the Brevan Howard funds, in much the same way that GARS and co are.”

Then goes on to say:

Last year Ruffer Investment Company was down by 10.98 per cent compared with a loss of 4.81 per cent for its average IT Flexible Investment peer.

So that idea of not losing money over any 12month period gets blown out of the water significantly. The joke gets worse though when you look at Ruffer's link on Trustnet and see it actually lost money in 3 out of 5 rolling 12 month periods. 3 in 5 years rolling 12m periods lost money and it's suggested to help when absolute funds can't LOL

Aiming to beat cash is a very low objective too.

- Worse still for anyone in Thailand. That 7.7% gain over 5 years would have been totally wiped out by exchange rate movements, with GBP losing ball park 20%-ish vs THB over 5 years

Gabelli Merger Plus+

Finally, the Gabelli Merger Plus+ is a ‘merger arbitrage’ strategy offering uncorrelated returns to equity markets and should rise when interest rates do and, according to McMahon, is “an attractive alternative to bonds in the current environment of struggling equities”.
“It achieves this by investing in agreed mergers, earning the spread between the deal price and the price of the acquired company at the time the deal is struck,” he said.

- Small fund. Not very liquid to boot
- What happens in a downturn when mergers/acquisitions dry up

Last year it made a loss of 7.54 per cent although NAV returns were stronger, said the Kepler analyst.
Gabelli Merger Plus+ currently trades at a 12 per cent discount to NAV due to a major investor selling out during thin trading last summer, according to McMahon, who highlighted the less liquid nature of its shares.

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So all in all, Ruffer and Gabelli I wouldn't touch with a barge pole. The BH funds really would need a lot of investigating and understanding exactly what you're investing in. But hardly transparent on an initial reading

Nice question in the article. Answers leave a lot to be desired

rgs2001uk Moderators Posts: 15,339 Likes: 11,271	Trusts to protect you when absolute return funds can't? Feb 20, 2019 21:13:35 GMT 7 Fletchsmile likes this Quote Select Post Deselect Post Link to Post Back to Top Post by rgs2001uk on Feb 20, 2019 21:13:35 GMT 7 Who writes this shoite, some digital pikey from Chiang Mai? Americentrism?
	worthless scum

AyG
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Trusts to protect you when absolute return funds can't? Feb 21, 2019 7:33:27 GMT 7

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Post by AyG on Feb 21, 2019 7:33:27 GMT 7

The author clearly isn't particularly knowledgeable. Absolute return funds are supposed to be uncorrelated with equity markets. However, correlation needs to be looked at over a long period of time - not just one year. Even uncorrelated assets will move in the same direction some of the time.

Fletchsmile
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Trusts to protect you when absolute return funds can't? Feb 27, 2019 16:08:26 GMT 7

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Post by Fletchsmile on Feb 27, 2019 16:08:26 GMT 7

How did your absolute return fund hold up in 2018’s difficulties?

www.trustnet.com/news/2273740/how-did-your-absolute-return-fund-hold-up-in-2018s-difficulties

I no longer hold any and have never done much more than dip a toe in to see + be disappointed. Nothing in the article to convince me otherwise

Last couple of para s sum it up for me. In particular

“I’ve never been a fan of absolute funds. The sector as a whole has consistently failed to deliver on its stated aims once charges and inflation are taken into account.

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Trusts to protect you when absolute return funds can't?

Post by Fletchsmile on Feb 20, 2019 12:36:11 GMT 7

Post by Fletchsmile on Feb 20, 2019 13:03:26 GMT 7

Post by rgs2001uk on Feb 20, 2019 21:13:35 GMT 7

Post by AyG on Feb 21, 2019 7:33:27 GMT 7

Post by Fletchsmile on Feb 27, 2019 16:08:26 GMT 7

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