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SLI opens retail door on GARS

Standard Life Investments has made its global absolute return strategies fund available to retail investors.

The fund was launched for institutional investors in September 2006 but was run internally from September 2005. It aims to provide investors with consistent, positive investment returns in a variety of market conditions by taking advantage of market inefficiencies across global markets.

To do this, it will invest in a combination of traditional investments such as equities, bonds and foreign exchange and derivatives-based trading strategies such as relative value, duration, credit spreads, inflation and volatility strategies.

SLI says this investment strategy draws on all its strengths in areas such as stock picking, dynamic asset allocation, derivatives management, risk management and quantitative discipline.

The benchmark for the fund is the UK six-month sterling Libor and the fund aims to out perform by 5 per cent a year gross of fees, over a rolling three-year period.
The Gars fund is designed to take advantage of market inefficiencies across global markets. It invests in a combination of traditional investments such as equities, bonds and foreign exchange and derivatives-based trading strategies such as relative value, duration, credit spreads, inflation and volatility strategies.

SLI says most investors want the potential rewards of investing without taking too much risk but traditional funds reward investors when markets go up and penalise them when the markets fall. It developed GARS, which uses stock selection and asset allocation, to even out the choppiness of returns through a diversified portfolio that invests across asset classes. As well as traditional asset classes such as equities and bonds, derivatives will be used to enhance returns and protect against market falls.

Some investors may feel multi-asset investing is the way forward at a time when market conditions are expected to remain difficult. When equity markets are really strong, this fund will lag, but if they fall, diversification will ensure investors do not suffer as much as equity markets.

However, this style of investing is relatively new in the UK and advisers may be concerned that investment managers do not have much experience in the derivatives trading strategies that non-Ucits retail scheme funds such as this allow.

Advisers may draw comfort from SLI’s experience in using derivatives – it traded £21bn in swaps last year – and the fact that this fund has an institutional track record.


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