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Absolute Return Bonds Guide

Clients

What type of client could these funds suit?
Absolute return bond funds should prove of interest to a variety of clients with different investment needs who are prepared to take some risk with their capital:
1. For clients wanting higher returns than cash deposits* but with relatively low risk
By aiming for better returns than ordinary bank and building society deposit accounts, absolute return bond funds can help to meet regular commitments, such as school fees, university tuition costs or nursing home charges. They could also represent a conservative option for self invested personal pensions.
*Please remember that absolute return bond funds are not a substitute for cash in a bank or building society account, where the client's money is secure.
2. For clients who want some protection from falling markets
Absolute return bond funds aim to achieve positive returns for investors regardless of market conditions, but this is not guaranteed.
3. For clients wanting to diversify their bond or equity portfolios
The performance of absolute return bond funds can be designed to have a low correlation with the overall direction of bond markets, and they may have a lower risk profile than equity funds. In this respect, for clients favouring a more cautious investment approach these funds could be incorporated into their portfolios to further diversify their risk exposure.
These funds could therefore be useful for clients:
- with a medium-term investment horizon- looking for a defensive product in an uncertain bond environment- seeking an asset class whose performance has a low correlation with that of bond or equity markets- favouring an absolute return product rather than an indexed fund- happy to have exposure to derivatives, and looking for instruments than can use both short and long strategies, but in a more regulated environment than a hedge fund
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