Posted inAbsolute ReturnMulti Asset

And the hit of 2014 is absolute return

Multi-strategy funds were responsible for more than a third of the total absolute return net inflows according to Morningstar data, with €7.2bn pouring in in the last four months of 2014 alone. Being the only asset class with consistent net inflows each month since 2012, the rise of alternative Ucits funds has been underway for a while, though performance has been disappointing in the past couple of years. In 2014, only managed futures were able to post meaningful returns. Investors seem to take that for granted though, as they are determined to establish absolute return as an important part of their portfolios.* 

{^image|(width)350|(height)196|(mouseoverheight)361|(url)/getattachment/EIE-Analysis/And-the-hit-of-2014-is-absolute-return/ucits_index_performance-(1).JPG.aspx?width=350&height=196|(alt)ucits_index_performance-(1).JPG|(align)left|(behavior)hover|(originalheight)361|(hspace)10|(mouseoverwidth)642|(tooltip)ucits_index_performance-(1).JPG|(originalwidth)642|(sizetourl)True^}

EIE’s asset allocation data confirm this drive to absolute return strategies, with buyers consistently outnumbering sellers over the past three years by a considerable margin. There is no other asset class to show such an impressive record. Across Europe, demand for absolute return is remarkably universal. In all but two of the 13 European countries surveyed, at least a third of fund buyers want to increase their allocation. On average, four in 10 fund buyers say they want to buy more absolute return, while only 7% intend to decrease their holdings. Finland and the Netherlands are the exception, with less than 20% buyers. Dutch fund selectors especially seem to see smart beta as an attractive, and cheaper alternative to alternative Ucits funds. 

alt=''

High yield: the bond black sheep

Although, that doesn’t seem to be true for all bonds. Interestingly, developed market corporate bonds came in second on the popularity ranking with net inflows of €25.5bn over the year. Emerging market and government bonds were also pretty popular, with inflows of €14.2bn and €13.4bn respectively. High yield bonds were the massive outlier, with net outflows of €8.6bn.

{^image|(width)450|(height)363|(originalheight)518|(url)/getattachment/EIE-Analysis/And-the-hit-of-2014-is-absolute-return/heatmap_alternatives.JPG.aspx?width=450&height=363|(behavior)hover|(tooltip)heatmap_alternatives.JPG|(mouseoverwidth)642|(originalwidth)642|(alt)heatmap_alternatives.JPG|(sizetourl)True|(mouseoverheight)518^}

If you want to know more about the rise of multi-strategy funds, read the March edition of the Expert Investor Europe magazine.     

Part of the Bonhill Group.