Five-minute guide to… Targeted absolute funds

They do this by investing in shares, bonds, cash, property and complex financial instruments, such as derivatives, to produce a “targeted” return year after year.

Savers have flooded into the sector, prompted by independent financial advisers claiming they can still make money in troubled times. Investment director at Architas Adrian Lowcock says the sector has been the most popular among private investors for eight months out of the last 12, but performance has fallen short: “Over five years, the targeted absolute return sector grew by 13.5 per cent, trailing cash.”

By comparison, the FTSE 100 grew by 30 per cent, but Lowcock says this does not mean that all funds have struggled: “The absolute return sector is an eclectic mix of investments, strategies and objectives, which makes it impossible to compare funds and judge performance.”

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