The Aviva Investors Multi Strategy Target Return Fund limited its losses on ‘Black Friday’ to just 0.5%, while GARS and the Invesco Global Targeted Returns Fund even recorded slight gains, though they were trading below pre-Brexit levels by the end of Monday. But all three funds have comfortably outperformed the absolute return fund sector since the vote for Brexit (see graph below).
An important reason that GARS and its Invesco cousin outperformed in the immediate aftermath of the Brexit vote might be their relatively low allocation to long equity risk compared to the Aviva fund, and their relatively high exposure to credit and duration risk. Indeed, especially the Invesco Global Targeted Returns Fund, has correlated quite significantly with investment grade bonds over that period.
It’s not the return that matters
But at least as striking is the notion that GARS has been strongly underperforming its two most prominent competitors, especially since the start of this year. GARS is down 5.33% since January 1st, and has only generated a total return of, believe it or not, 5.33% over the past three years, falling far short of its objective to generate a 5% p.a. over rolling three-year periods.
Nevertheless, investors have continued to pile into the fund, as they primarily buy it for diversification purposes rather than seeing it as a return generator. One of those investors is Tim Peeters, head of securities portfolios at Portolani, a multi-family office based in Antwerp. The Belgian has been investing in GARS and its peers for almost two years now.
“I still trust GARS,” he says. “But you have to invest in it in combination with other, uncorrelated multi-strategy funds. If you take three or four of these funds together, you get a stable block.”