He considers that investor demand could lead to the sector growing to £10bn-£15bn and adds that competition is a good for established firms like BlackRock. The IMA set up the absolute return sector in April last year and it has 21 funds and almost £3bn of assets.
Hoctor-Duncan points to research by BlackRock showing that, over 5,000 trading days between 1987 and 2007, the average annual return was 7 per cent. However, if you missed the best 50 days your annual return would be zero while if you were out of the market for the worst 50 days your return would be 20 per cent. He says: “The advantage of absolute return funds is they can offer investors a chance to avoid timing the market, which no one in the world can do well all the time.”
Hoctor-Duncan says the firm will look to offer two or three more absolute return offerings. The group is running paper portfolios for two equity absolute return funds as well as plans for another in fixed income.