For cautious investors looking for steady, reliable returns ahead of cash year-in, year-out, the five crown-rated Insight Absolute Insight fund is one of the most well regarded absolute return products on the market, according to FE Research analysts.
The new portfolio will use equity markets in an attempt to boost Absolute Insight's returns.
"It takes a macro investment approach, so predominantly this means index trades using liquid indices rather than bottom-up stockpicking," said FE Alpha Manager Sonja Uys, who heads up the fund.
"It’s mainly non-directional but it falls within our Absolute Insight wrapper. The Market Neutral fund brings stability, the Currency fund brings diversification and then the other remaining four funds provide what we call upside capture."
Uys (pictured) says the Absolute Insight Dynamic Opportunities fund will make up 8 per cent of the total portfolio. "We’re implementing it in two phases. The first phase starts at 4 per cent, then we go to 8 per cent for Dynamic Opportunities. We get that by taking 2 per cent from each of the existing bigger strategies."
Uys says the fund has been run on paper for the last 18 months and is intended to expand the investment universe currently available from Insight’s absolute return range and allow it to carry out trades the firm couldn’t previously offer.
"We have a process before we add any new strategy," she said. "That new strategy is managed by the multi-asset team that is also at Insight."
"To the market it’s like 'oh, that’s a new fund'. It’s not that we decided to launch a new fund and now Absolute Insight has to give some money to it. It was very much designed for the purpose of an investment by the Absolute Insight fund," she said.
Uys adds that Insight has also expanded the investment universe for its Absolute Insight UK Equity Market Neutral fund to allow it to look further afield for investment opportunities.
"The component that we think of as providing stability, which is the UK Equity Market Neutral strategy, what we’ve done at the end of August is drop UK from the name and thereby from the universe. Effectively we’re saying it’s now a global fund," she said.
"In the immediate future there’s no difference because it’s the same team, they still have most of their skill-set in the UK and also in Europe. We’ve always been investing about 20 per cent in Europe. It just means now we have a bit more flexibility as the fund grows to cover any capacity issues."
Uys assures investors the team is not planning to invest in more niche regions such as Japan because it doesn’t have the resources to widen the investment universe to that point.
"What the Absolute Insight fund does is it invests in different absolute return strategies which are all complementary and all managed internally by Insight," she said.
"These strategies are all uncorrelated. There’s always a time when one or two of the strategies will do well and therefore diversify the fund’s returns."
"What we try to do is deliver consistent returns in all markets. We try to share in some of the market upside when markets go up. We don’t try to outperform the market. We’re open about the fact that we will likely underperform the general market if it continues to rally, but what’s more important for us is to focus on capital preservation."
"We look at returns on a 12-month horizon, and each of the strategies in which we invest also looks at its own returns on a 12-month horizon."
The fund has consistently delivered positive returns over the short- and medium-term, outperforming its Libor Libid GBP 3m index over one, three and five years.
Since launch in February 2007, the fund has steadily gained 34.05 per cent while the IMA Targeted Absolute Return sector has made 21.77 per cent. The index gained 14.78 per cent over this period.
Performance of fund vs sector and index since launch
Source: FE Analytics
The fund has also been remarkably consistent over each calendar year since launch, only losing money in the financial crisis of 2008, when it fell 0.17 per cent.
Its peers in the IMA Targeted Absolute Return sector lost 3.6 per cent that year while the Libor index gained 5.52 per cent.
The fund has outperformed its benchmark every year except the falling markets of 2008 and 2011.
Discrete calendar year performance of fund vs sector and index
| Name | 2013 (%) | 2012 (%) | 2011 (%) | 2010 (%) | 2009 (%) | 2008 (%) |
|---|---|---|---|---|---|---|
| Insight Absolute Insight | 2.41 | 6.42 | 0.24 | 8.97 | 10.51 | -0.17 |
| IMA Targeted Absolute Return | 5.03 | 3.41 | -1.26 | 4.32 | 8.61 | -3.6 |
| Libor Libid GBP 3m | 0.33 | 0.71 | 0.75 | 0.58 | 1.1 | 5.52 |
Source: FE Analytics
The fund requires a minimum investment of £5,000 and has ongoing charges of 1.32 per cent. It also has a 10 per cent performance fee.
Click here to learn more about absolute return investment strategies, with the FE Trustnet Guide to Absolute Return.
