All-weather multi-asset funds see “modest” slide amid carnage

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Certain absolute return multi-asset strategies which offer all-weather return profiles have withstood the recent market turbulence, delivering “impressive” capital preservation which bodes well for future investor appetite, according to Bfinance.

Multi-asset absolute return funds lost some 2.1 per cent on average during last month’s turmoil, a “rather modest” slide compared with investment grade credit and absolute return fixed income strategies, which tumbled some 7 per cent, and the MSCI World index, which lost more than 20 per cent, said Chris Stevens, director, diversifying strategies at Bfinance.

“While most asset managers in this space lost money during an extremely testing first quarter, average declines were relatively modest and certain strategies delivered impressive capital preservation,” Stevens noted in a commentary this week.

Absolute return multi-asset strategies, which have enjoyed rising investor appetite in recent years, typically avoid heavily reliance on being long risk assets to drive returns.

Stevens said: “Since these strategies typically have a focus on relative value trades with low market directional risk, their performance is even more impressive when we consider that relative value hedge funds were down some 6.5% on average according to HFRI data.”

The note observed how alternative risk premia strategies lost 6 per cent in March, while multi-asset hedge funds saw extreme performance dispersion, most notably in macro, while pure trend-following and long volatility strategies did well relative to peers.

“Overall, once results are digested, we believe that the performance during the first phase of the COVID-19 crisis will support ongoing investor demand for multi-asset strategies – particularly the absolute return contingent,” he added.