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Advisers backing move away from absolute return term


Advisers have welcomed Morningstar’s plan to move away from the term “absolute return” by introducing 18 new alternative investment categories.

The new categories cover over 3,000 Ucits funds with alternative investment strategies. The company is removing its previous EUR absolute return, non-EUR absolute return and long-short sectors which cover absolute return funds and replacing them with the new classifications. Funds will be categorised primarily on underlying investment portfolio and risk exposure.

Hargreaves Lansdown senior analyst Meera Patel says: “The absolute return sector has become like the UK all companies sector, with too many strategies operating within it. It makes sense to split them, although it will mean more sectors for IFAs.”

Informed Choice managing director Martin Bamford says: “This is a good move that will help IFAs and investors understand what these funds look to do as it is far more descriptive.”

Bestinvest senior investment adviser Adrian Lowcock says: “This move is likely to help in the long run but it may confuse investors and advisers in the short term, as many have become accustomed to absolute return.”

The Investment Management Association is to consult on the structure of the absolute return sector later this year.


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  1. Absolute return investment techniques include using short selling, futures, options, derivatives, arbitrage, leverage and unconventional assets.

    Alfred Winslow Jones is credited with forming the first absolute return fund in New York in 1949. In recent years, this so-called absolute return approach to fund investing has become one of the fastest growing investment products in the world and is more commonly referred to as a hedge fund.

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