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Alternatives to the CF Odey Absolute Return fund

The top-performing fund in the IMA Targeted Absolute Return sector over one and three years will introduce a 4 per cent charge for new investors from 10 July.

Joshua Ausden

By Joshua Ausden, Editor, FE Trustnet
Monday July 08, 2013

James Hanbury’s top-performing CF Odey Absolute Return portfolio has been closed to new investors, meaning they will have to look elsewhere for a long/short fund that targets a positive return in both rising and falling markets.

CF Odey Absolute Return is the number-one IMA Targeted Absolute Return fund over one and three years, although its high risk-profile means that it is not comparable to most of the other options in its sector. Indeed, it is one of the very few absolute return funds that takes the FTSE All Share as its benchmark.

Performance of fund, sector and index over 3yrs


Source: FE Analytics

Significant inflows – which have pushed assets under management (AUM) to £629m – have prompted management to soft-close the fund. From 10 July, anyone hoping to invest in CF Odey Absolute Return will have to cough up a 4 per cent initial charge.

Here, we identify some highly rated funds that use similar mechanisms as CF Odey Absolute Return, but that crucially remain open to new business.

Cazenove Absolute UK Dynamic

FE Alpha Manager Paul Marriage’s Cazenove UK Absolute Dynamic fund also uses both long and short positions in equities to attempt to deliver an absolute return.

The five crown-rated fund has been very successful in doing so since its launch in May 2009, achieving a positive return in every calendar year and achieving top-quartile cumulative returns in its sector in the process.

Performance of funds vs sector since May 2009


Source: FE Analytics

Like the Odey fund, Cazenove UK Absolute Dynamic is more volatile than its peer group. It invests exclusively in equities, and is not market neutral, meaning that it is susceptible to losses in falling markets. ALT_TAG

Hanbury’s fund has been significantly more volatile over the last three years, though; our data shows that CF Odey Absolute Return has an annualised volatility of 12.7 per cent over the period, compared with Cazenove UK Absolute Dynamic’s 5.18 per cent.

Marriage (pictured) and co-manager John Warren target an annualised return of 10 per cent over the medium-term, which compares with between 3 and 4 per cent for the average absolute return portfolio.

In total, the team has 59 long positions and 34 short ones. The fund is currently short UK large caps, but long UK small and mid caps. With regard to investment sectors, Marriage and Warren have short positions in general retailers and consumer services.

The long portfolio reflects Marriage’s highest-conviction plays in his Cazenove UK Smaller Companies fund – another five crown-rated vehicle. Both of the funds count Perform Group and Xaar as their two biggest holdings.

Cazenove UK Absolute Dynamic requires a minimum investment of £1,000 and has an ongoing charges figure (OCF) of 1.64 per cent. However, it also charges a 20 per cent performance fee.

Jupiter Absolute Return

FE Alpha Manager Philip Gibbs is one of the most highly respected fund managers in the business, thanks largely to his stellar performance in various market crises.

He launched the £536m Jupiter Absolute Return fund back in December 2009 to much fanfare. Like the Odey and Cazenove portfolios, Gibbs attempts to deliver a positive return by using long and short positions; crucially, however, the Jupiter fund also invests in fixed interest, cash and currencies, which has contributed to its lower volatility compared with these portfolios.

Short positions at the moment include Japanese equities and the euro currency.

Performance of fund vs sector and benchmark since launch


Source: FE Analytics

Gibbs’ fund has had a tough time since its launch, underperforming both its sector average and Libor GBP 3month index benchmark, with returns of just 1.62 per cent. Over the same period, the Odey fund has returned more than 100 per cent, albeit with significantly more volatility.

Fund of funds manager at Cazenove Robin McDonald recently defended his position in the underperforming fund, insisting that it remains a good option for a diversified portfolio.

"Philip is the archetypal bear market investor. He has delivered the bulk of his outperformance during bear markets during his career," McDonald said.

"The problem is that we haven’t been in one, but that’s not something that concerns me. We have great sympathy with Philip’s cautious view. Besides, this fund is something of an insurance policy for us. He’s there for a Goldilocks scenario – to get us out of trouble, or at least to help, when things turn very quickly."

Jupiter Absolute Return is available for a minimum investment of £500 and has an OCF of 1.48 per cent. It charges a performance fee of 15 per cent.

City Financial UK Equity

The least well-known of the three funds is David Crawford’s £33.5m City Financial UK Equity portfolio.

It has the most similar risk profile to the Odey fund, though has not managed to keep up with it on a total return basis in recent years.

Performance of funds and sector over 3yrs


Source: FE Analytics

Crawford’s fund has comfortably beaten the IMA Targeted Absolute Return sector average, however.

As of the end of May, the manager was long gold and had a significant short position in the FTSE 100.

Again, the fund charges a performance fee, this time of 20 per cent. It is available for a minimum investment of £1,000 and has an OCF of 1.73 per cent.


This article is for professional investors only. You will be redirected to the News & Research homepage in seconds. If you are having problems getting to the page, please click here
Data provided by FE. Care has been taken to ensure that the information is correct, but FE 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.

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