What Are the Top Performing Absolute Return Funds?

What Are the Top Performing Absolute Return Funds?

Absolute return funds are investment funds that aim to deliver consistent returns regardless of the market conditions. These funds use variousinvestment strategiessuch as long/short equity, global macro, and event-driven to achieve their objective. In this article, we will discuss the top performing absolute return funds and their investment strategies.

Long/Short Equity Funds

Long/short equity funds are absolute return funds that use a combination of long and short positions in stocks to achieve their objective. The long positions are stocks that the fund manager believes will increase in value, while the short positions are stocks that the manager believes will decrease in value. By using this strategy, the fund can generate positive returns regardless of the direction of the stock market.

One of the top performing long/short equity funds is the AQR Equity Market Neutral Fund (QMNIX). This fund has a 10-year annualized return of 8.72% and uses a quantitative investment strategy to identify mispricings in the stock market. The fund has a low correlation to traditional stock and bond markets, making it an excellent diversification tool for investors.

Global Macro Funds

Global macro funds are absolute return funds that use a top-down approach to investing, meaning they analyze global economic trends to identify opportunities. These funds can invest in various asset classes such as stocks, bonds, currencies, and commodities. By taking a global perspective, these funds can generate positive returns regardless of regional market conditions.

One of the top performingglobal macro fundsis the Bridgewater All Weather Fund (AWFAX). This fund has a 10-year annualized return of 7.75% and uses a risk parity approach to investing. The fund invests in a diversified portfolio of assets, including stocks, bonds, commodities, and currencies, to achieve its objective.

Event-Driven Funds

Event-driven funds are absolute return funds that invest in companies that are undergoing significant corporate events such as mergers, acquisitions, and spin-offs. These funds use a bottom-up approach to investing, meaning they analyze individual companies to identify opportunities. By investing in companies undergoing significant events, these funds can generate positive returns regardless of the direction of the stock market.

One of the top performing event-driven funds is the Paulson Merger Arbitrage Fund (PMAFX). This fund has a 10-year annualized return of 6.13% and focuses on investing in companies that are involved in mergers and acquisitions. The fund uses a disciplined investment approach to identify undervalued companies and take advantage of market inefficiencies.

Investment Strategies

Investing in absolute return funds can be a great way to diversify your portfolio and generate consistent returns. However, it is essential to understand the investment strategies used by these funds before investing. Long/short equity funds invest in a combination of long and short positions in stocks, while global macro funds use a top-down approach to investing. Event-driven funds invest in companies undergoing significant corporate events. By understanding the investment strategies used by these funds, you can make informed investment decisions.

Investment Experience and Tips

Investing in absolute return funds requires a long-term view and patience. These funds may not generate significant returns in the short term, but over the long term, they can deliver consistent returns. It is essential to diversify your portfolio and not rely solely on absolute return funds. It would help if you also considered your risk tolerance and investment objectives before investing in these funds. By doing so, you can create a well-diversified portfolio that can withstand market volatility.