Real Return funds deliver in extreme market sell-off

Real Return funds have suffered much criticism in recent times as they have lagged their Strategic Asset Allocation counterparts during the growth market bull run.

8 Oct 2019

Real Return funds have suffered much criticism in recent times as they have lagged their Strategic Asset Allocation counterparts during the growth market bull run. However, according to Zenith Investment Partners’ Multi-Asset (Real Return) Sector review, the more defensive nature of a Real Return strategy did protect capital in down periods over the last financial year, most notably during the significant sell-off that occurred in the fourth quarter of 2018.

Throughout the fourth quarter of 2018, managers of Real Return funds demonstrated an ability to preserve capital and outperform their SAA ‘Growth’ counterparts amidst an extreme environment which saw global equities sell-off aggressively.

These outcomes were consistent with expectations. However, a high degree of dispersion did occur across the peer group. Broadly speaking success was dictated by positioning leading up to, and subsequently in response to the sell-off.

By Andrew Yap, Head of Multi-Asset and Australian Fixed Income