Posted inAbsolute ReturnMulti Asset

Investors keep pouring money into GARS – is that a good idea?

According to Morningstar fund flows data, net inflows into absolute return funds were back up at €6.1bn in November after two months of lacklustre appetite. However, flows were more concentrated than usual with the bulk of the money flowing into multi-strategy and market-neutral equity funds.

Within multi-strategy, and also within the wider fund universe, the SLI GARS Fund was by far the most popular fund, as investors apparently remain unconcerned about the size of the fund. It is now the biggest actively managed strategy for sale in Europe, with last month’s €1bn of net inflows taking it to more than €50bn in assets under management.

Absolute loss

It seems investors have also turned a blind eye to the recent investment returns GARS has delivered compared to some of its peers. If you had invested in the fund in mid-February, you would have ended up with an absolute loss rather than an absolute return by Christmas. The Aviva Investors Multi Strategy Target Return fund, for example, had a much lower volatility than GARS this year and has posted a year-to-date return of 5.06%, more than double that of GARS. Yet it received less than a third of the inflows of the former in November.

However, that figure still meant the Aviva Investors fund was the second most popular multi-strategy fund over the month. The SLI Global Focused Strategies fund, the sister fund of GARS which was launched in December 2013, has delivered an even better YTD-return than the  Aviva Investors Multi Strategy Target Return fund (7.93%), yet inflows into the fund have been dwarfed by those into GARS.

Part of the Bonhill Group.