The Baillie Gifford Diversified Growth and CF Odey UK Absolute Return funds celebrate their third anniversary this month, paving the way for dramatic inflows.

Demand has already been proven in the institutional market for the £1.3bn Baillie Gifford Diversified Growth portfolio. Over the last 12 months its assets under management (AUM) have nearly trebled.

James Budden, director of marketing and distribution at Baillie Gifford, announced that the group will take advantage of that momentum by promoting it for retail investors in the near future.

"Our strategy with that fund is to build a track record before pushing it in the retail market," he said. "It’s available on some of the platforms so investors are free to buy it if they want."

In Mike Brooks and Patrick Edwardson, the fund has two relatively unknown managers at its head. However, they have produced impressive returns without jeopardising capital by taking on too much risk.

According to data from FE Analytics, the fund has returned 36.45 per cent since launch and its volatility profile is similar to that of the popular low-risk Trojan fund. This performance has earned the fund five crowns from FE.

Also celebrating the three-year milestone this month is the £245m CF Odey UK Absolute Return fund.

This is a long-short equity fund that utilises hedge fund-style strategies to achieve an absolute return over 12 months irrespective of market conditions.

Our data shows that James Hanbury and Jamie Grimston, who co-manage the fund, have been successful in that aim, outperforming the sector average and providing a positive return in each of the calendar years it has been open.

However, Hargreaves Lansdown’s Rob Morgan says investors need to be careful as the sector comparison is misleading.

"The fund has been quite closely correlated to the FTSE and bears all the hallmarks of a long-only equity portfolio," he explained. "Investors need to be wary of what type of product it is going to be going forward. It has exploited the market rally of the last three years by holding equities and my feeling is that it is likely to evolve into a long-short strategy in the future."

The fund tops the sector with returns of 70 per cent since it was launched on 5 May 2009. That compares with 40 per cent from its nearest rival, Henderson Credit Alpha, and just 10 per cent from the average Absolute Return fund.

Performance of fund since launch vs sector



Source: FE Analytics

The high returns have come at the cost of stability. With an annual score of 17.42 per cent since it was launched the fund is the most volatile in the sector by some margin.

Another notable fund to be celebrating its third birthday this May is the £462m JPM Strategic Bond fund.

Our data shows that it has underperformed since launch with a return of 29.24 per cent. The average Strategic Bond fund has returned 40 per cent.

Performance of fund since launch vs sector



Source: FE Analytics

Morgan commented: "Manager Nick Gartside has struck me as a sensible manager whenever I’ve spoken to him but the Strategic Bond sector is a highly competitive space and there is stiff competition from the likes of M&G and Kames. There might not be much wrong with what Gartside is doing but we recommend other options."