Even though most absolute return funds have delivered poor performance over the past 18 months or so, Italian fund buyers still have appetite for the asset class. While their failure to produce returns has cooled enthusiasm for absolute return in much of the rest of Europe, Italians keep wanting more of these funds, even though they have been as bitterly disappointed about performance as their peers in the rest of Europe.
When our researchers went to see Italian investors in Milan last week, the latter complained that, all too often, absolute return funds combine high fees with inconsistent results. However, they haven’t given up hope and still believe they will find an absolute return fund to their liking one day.
Long/short equity funds have disappointed Italy’s fund buyers most of all absolute return categories. Ironically however, these funds remain the most popular product too: 54% of interviewees intend to increase their allocation over the next 12 months. They blame the bad performance on lack of market volatility throughout much of the year, making life difficult for long/short investors.
Hitting the limits
Multi-asset funds are another long-standing favourite with Italian investors. Though clients like such funds, which have performed a lot better than their long/short cousins, fund buyers believe they have now reached their maximum allocation. After all, multi-asset funds won’t offer any protection if bond and equity markets head south simultaneously. Besides that, local fund selectors recognise they risk losing control over their asset allocation if they continue to heed their clients’ wishes by investing more in multi-asset funds. Having 25% of total assets allocated to multi-asset funds is not an exception for Italian investors.
This makes it understandable that Italian investors are looking beyond multi-asset funds to meet today’s investment challenges, even though they arguably also give away control over asset allocation by investing in global macro or multi-strategy funds…