The company says absolute returns strategies are attractive in times of increased market volatility, when the performance of individual asset classes is uncertain. However, investing in one absolute return fund leaves investors dependent on that manager’s ability to generate returns, make asset allocation decisions and hold on to the money they have made.
The Blacksquare fund builds on the firm’s fund of hedge fund experience in providing diversification of fund management group, asset class, region and trading style. It will comprise 15 funds at launch, but this will be increased to 23 funds in January.
Around 100 to 150 funds are screened in terms of investment strategy, performance, risk management and correlation to other funds in the portfolio. The company does not charge a performance fee, as it believes this would be inappropriate for a fund of funds,.
Blacksquare says that after completing due diligence on the underlying managers, it expects to hold them but will sell if the manager is losing money and not reducing risk.
Many absolute return funds have launched over the last couple of years, using different investment strategies to various degrees of success. Some hedge fund groups are creating Ucits compliant versions of their existing funds, so IFAs may welcome a multi-manager fund to separate the wheat from the chaff.
However, Blacksquare may need to boost its profile among IFAs before attracting investment in this fund.