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Standard Life GARS & co stand up to market sell-off

14 October 2014

The £21.2bn behemoth had a rotten time back in May 2013 when the markets last took a tumble, but in recent weeks it has stood up to the most recent test, alongside many of its rivals.

By Joshua Ausden,

Editor, FE Trustnet

Standard Life Investments Global Absolute Return Strategies and its newly launched rivals have all lost less than 1 per cent since the FTSE All Share took a turn for the worst in early September, according to FE Trustnet research.

The UK index has lost the best part of 8 per cent since 4 September 2014, with worries over the economic recovery in Europe, geo-political tensions in Iraq and Ukraine and the threat of Ebola contributing to the falls. The MSCI AC World index is down just over 5 per cent.

The last time the markets had a shake up of this level was back in May 2013, when the taper tantrum sent both bonds and equities into the red.

Standard Life’s GARS disappointed investors with losses of over 6 per cent, with the likes of Newton Real Return also suffering badly, as reported by FE Trustnet.

Performance of fund and indices over 3yrs

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Source: FE Analytics

This time around GARS has done a much better job, down just 0.28 per cent since markets took a turn.

Two new rivals to the £21.2bn behemoth – Invesco Perpetual Global Targeted Returns and Aviva Investors Multi-Strategy Target Return – have also fared relatively well, losing a moderate 0.53 and 0.84 per cent respectively.

Both were founded by former GARS managers – David Millar in the case of Invesco and Euan Munro in the case of Aviva Investors.

All three teams use similar long/short, market neutral and directional strategies in an attempt to deliver a positive return over rolling three-year periods.

Performance of funds and index since 4 Sep

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Source: FE Analytics


Whitechurch’s Ben Willis voiced concerns over the poor performance of GARS during last year’s taper tantrum, saying he and his team were keeping a close eye on it.

Managing director of the firm Gavin Haynes says he’s glad the position in GARS was upheld across the model portfolio range.

While he points out that May 2013 was a perfect storm, with both equities and bonds selling off, he says the strong performance of GARS recently is not to be sniffed at.

“We continue to hold onto it and see ourselves as long-term investors. It’s been a relatively long-term holding in our balanced and cautious portfolios,” he said.

“That sell-off last year was a blip in an otherwise impressive history. It’s encouraging to see that it’s been positioned in the right way and proved very resilient. The fund is doing what we want it to do – acting as a diversifier against risk assets.”

While many see absolute return funds as very short-term holdings, Haynes says that one like GARS shouldn’t be judged on how it performs in a single week or month.

“It’s targeting that three-year rolling number. While we are perhaps looking for it to deliver a little on a shorter-term basis than that, you’ve got to be looking at what it does over a year,” he said.

Standard Life GARS is up 3.08 per cent so far in 2014, and therefore on course to deliver a positive return every calendar year since launch.

In spite of a very difficult period in May, Guy Stern and his team still made 6.17 per cent in 2013.

The fund has now more than made back its money since coming into trouble last spring, with FE data showing it has returned 2.26 per cent since 20 May 2013.

Some absolute return funds have gone a step further than GARS, managing to eke out a positive return since markets took a turn.

FE data shows that 22 of the 75 funds in the sector have made a positive return since 4 September, including seven that have delivered over 1.5 per cent.

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Source: FE Analytics

The ever dependable Insight Absolute Insight fund, which has been one of the most consistent in the sector since its launch in 2007, has managed 0.15 per cent.

The fund of funds has been propped up by one of its largest holdings, Insight Absolute Insight Currency, which is itself a constituent of the IMA Targeted Absolute Return sector.

It has delivered just shy of 3 per cent over the period.

Other popular funds that have stood up to testing market conditions include Old Mutual Global Equity Absolute Return, Threadneedle Absolute Return, BlackRock European Absolute Alpha and Schroder UK Absolute Target, all returning between 1 and 2 per cent.

Not all funds in the IMA Targeted Absolute Return sector have protected investors’ money effectively, though only two have lost more than 4 per cent.

FE Alpha Manager Iain Stewart’s Newton Real Return fund has once again struggled in the face of market turbulence, shedding just under 3 per cent.



Hugh Hendry’s miserable 2014 has been confirmed by losses of 4.1 per cent since 4 August. His £37m CF Eclectica Absolute Macro fund is now down 13.91 per cent for the year.

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Source: FE Analytics

While all IMA Targeted Absolute Return funds aim to deliver a positive return in all market conditions, some take on higher levels of risk than others.

Pure long/short strategies such as City Financial Absolute Equity and CF Odey Absolute Return have annualised volatility scores closer to the equity market than the typical absolute return portfolio.

Both have held up well since 4 September, with David Crawford’s City Financial fund managing a positive return of 0.61 per cent and James Hanbury's Odey fund a loss of 0.87 per cent.

The strong showing caps a so-far excellent year for Crawford, whose fund has returned an impressive 15.32 per cent in 2014.

Only the little-known Natixis H2O MultiReturns portfolio has returned more. Odey, on the other hand, has had a tougher time, as reported by FE Trustnet earlier this year.

Though performance has improved recently, Hanbury has lost 5.57 per cent year-to-date.

While not strictly an absolute return fund, Sebastian Lyon’s Trojan portfolio always keeps an eye on downside protection and typically performs best on a relative basis when markets fall.

The £2.2bn fund has lost 0.88 per cent since 4 September, compared to a fall of 3.83 per cent in the IMA Flexible Investment sector average.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.