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Monday, April 05, 2010

How Invincible are Absolute Return Funds?

News summary by MFWire's editors

As part of its Investing in Funds section, the Wall Street Journal examined absolute return funds, the mutual funds that promise gains in any market.

"The name 'absolute return' implies positive returns in any market environment, regardless of strategy. That mandate is very difficult," Nadia Papagiannis, alternative-investment strategist at Morningstar, told The Journal. "We haven't seen anybody do it."

Investors still shaken by the 2008 crash are taking to the investment type. There are now 22 funds with "absolute" in their name, which is 18 more than in 2005.

One of the newer funds is the Putnam Absolute Return 700, which was launched in 2008. Putnam has over $1 billion AUM in its four-fund absolute return family.

"I don't think we've set our sights too high," Jeff Knight, managing director and the head of global asset allocation at Boston-based Putnam Investments, said in the article. Absolute return "is the next big category in the mutual-fund business."

So how have absolute return funds actually fared? On average, they have returned 0.67 percent so far this year and 11.56 percent in the past 12 months, according to Morningstar.  

Edited by: Daniel Tovrov

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