Investors putting money into absolute return funds are being advised to check how and when performance fees are applied. Some of these funds deduct 20 per cent of any performance above a “hurdle” rate set as low as the return on cash.
Absolute return funds – which aim to deliver positive returns in any market conditions by taking both long and short positions – are now the most popular in the UK. Figures released by the Investment Management Association show that that the Absolute Return fund sector was the highest selling sector in September – accounting for £442m of net retail inflows, and overtaking the Sterling Corporate Bond fund sector which had spent 10 consecutive months at the top of the sales chart.
