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You are here: Absolute Return Bonds Guide

Absolute Return Bonds Guide


What is an absolute return bond fund?
Absolute return bond funds aim to achieve positive returns for clients in all market conditions regardless of whether interest rates are rising or falling. They can do this by investing in a combination of money market securities, bonds and bond market derivatives.
The new UCITS III regulations have made it possible to offer these groundbreaking funds to private clients and a short explanation of the use of derivatives is provided further on in this guide.
Effectively, the new UCITS III rules opened up a fresh area of opportunity. Previously, the use of derivatives had been limited to efficient portfolio management, such as currency hedging. The UCITS III regulations differentiate between older-type funds that are limited to using 'less sophisticated' derivative strategies, and those able to use 'more sophisticated' ones (ie more flexible derivative strategies). Absolute return bond funds look to make good use of these new investment powers.
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