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Volatile markets prompt mass shift to absolute return funds, says Wellian

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Current levels of risk in today’s market have provoked a mass influx of funds under management towards the absolute return sector, according to Wellian Investment Solutions.

The DFM has said that today’s AUM for absolute return (as measured by the IA Targeted Absolute Return Sector) is substantially higher than five years ago when the sector accounted for 25 funds in total with an AUM of just GBP12 billion.
 
Current AUM as of 30 September 2015 stands at almost five times that amount, with as many as 60 funds and AUM of GBP54 billion. Standard Life GARS continues to be the dominant provider in the market accounting for more than half of the total market share.
 
Consequently, Wellian has reported heightened competition in the market in response to increased demand for safe haven investment options. Therefore, the DFM has suggested that a price war among providers in 2016 could be likely; making the sector look increasingly attractive.
 
However, Richard Philbin (pictured), CIO of Wellian Investment Solutions has warned that whilst absolute return funds provide good diversification to a client portfolio; for example, the majority are unable to provide a certain yield or income.
 
‘Looking to absolute return funds for comfort when markets are uncertain is quite a common approach to take,” says Philbin. ‘Whilst these funds are great for providing diversification to a client portfolio; they are not the panacea to the current issues surrounding the investment markets. The name ‘absolute return’ is in itself, misleading, as not all of these funds have the same objective, nor do they provide certain yields or income. Anyone considering this option as a way of withstanding current market conditions might also wish to look at gilts or fixed income which are able to provide sustainable yields in times of great uncertainty.’

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