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Blast from the past


To Cheltenham, where I manage to invest some £120 over the course of six races and return home with, er, £120 – plus or minus a couple of quid, depending on the exact amount of spare change I had in my pocket at the start of the day. With that sort of performance, I am seriously considering setting up as an absolute return fund manager.

OK, admittedly that sort of performance might only make me a third-quartile-ish absolute return fund manager – if, of course, absolute return funds were capable of comparison when we all know, or at least have been reassured many times by investment houses, this is impossible as it would be like comparing apples and traffic cones.

Still, flagging up the prospect of this exciting potential change of career on the journey back to London, my brave new world is immediately thrown into turmoil when one of my fellow travellers asks the chilling question: “Hey … whatever happened to 130/30 funds?”

Good grief, 130/30 funds – I remember them from way back in the mists of time. 2007, wasn’t it?

Certainly, I know they were the glorious future of investment and yet, now we come to mention it, I can’t think when I last heard of one. 2008, wasn’t it? And if those wonderful vehicles have been expunged from history with the ease of a child shaking its Etch-a-Sketch, how can
I commit myself to absolute return funds, the latest glorious future of investment?

Three years from now, will they too all have been swept under the carpet by an embarrassed fund management industry?

One would hope not – after all, absolute return funds do feel as if they have some role to play in the construction of client portfolios – and yet how can we be sure it won’t all happen again? Anything supposedly gets easier the more times you do it.

So what did ever happen to 130/30 funds? What was wrong with them? Apart, of course, from the name, which even at the time I think we all
knew was ridiculous and jargony and more likely to put investors off than have them running in droves to commit their cash. With their cunning
structure that looked to have its cake with the long book and then have it again with the short book, surely Double Upside Potential Exposure
funds or “Dupes” would have been catchier.

Were they just in the wrong place at the wrong time? My trusty research assistant Miss Google confirms that almost all those references to 130/30 funds that still exist on the web date from either 2007 or 2008 – though somebody, bless them, saw fit to update the relevant Wikipedia page only last month – so perhaps they were just one more victim of the credit crunch and really, really horrible markets.

But fund management groups had such faith in them – they really believed in the concept, didn’t they? That being the case, could 130/30 funds and 120/20 funds and 140/40 funds and all the other permutations have their time in the sun again? Or have they really never gone away, merely
changing their name as, forced by adverse circumstances, they reluctantly became part of the fund management equivalent of a witness protection scheme?

Surely nobody could be that cynical – although I must remember to have a wander around the IMA’s Absolute Return sector, just to see if there are any funds wearing obvious wigs or particularly outlandish moustaches.

I don’t know, it’s funny how easily one’s world can be rocked or at least how one’s faith in the good, good people of the asset management sector can be tested. Sure, I know fund marketeers and product developers aren’t completely perfect but this rewriting of the past seems a bit cavalier, even for them.

Can you imagine if they made a habit of it – spending hundreds of thousands of pounds, maybe millions, promoting each new future of investment before simply shrugging a year later, maybe muttering an embarrassed “Oops” and then moving onto the next one? Crikey, it could happen with sector funds, say, or something even more ridiculous like, oh, I don’t know, football funds. No, you’re right – no serious business could operate like that.

Julian Marr is editorial director of marketinghub.


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