The FSA Spy market buzz – 1 November 2024
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HEAD-TO-HEAD: Aviva vs GAM
FSA compares the Aviva Investors – Global Convertibles Absolute Return Fund with the GAM Multibond Absolute Return Bond Fund.
Pictured: Mehdi Douali, Allfunds
Absolute return funds target a level of return usually stated as a few percent above the Libor, with a lower volatility than equity markets. The strategies used to deliver this can vary, from bonds to equities, with a range of funds that mix the two asset classes.
While absolute return funds target a relatively stable level of return, the reality is often much more volatile.
“The performance is usually assessed over three-to-five years, but on a shorter-term basis, funds often show significant diversion from their targets,” Mehdi Douali, alternative strategies and multi-asset analyst at Allfunds, told FSA.
“They tend to diverge significantly from their target returns for various reasons, either misallocation in terms of duration of a bond portfolio, or too much equity delta,” he said.
Equity delta measures the price sensitivity of a derivative to the changes in the price of the underlying stock. It is relevant for funds that use derivatives extensively.
Most absolute return funds employ derivatives as protection from market downturns, thus, in principle, limiting volatility, but they do it also to enhance yields.
With this in mind, FSA compares two mixed-asset funds: the Aviva Investors – Global Convertibles Absolute Return Fund with the GAM Multibond Absolute Return Bond Fund.
|
Aviva Investors – Global Convertibles Absolute Return Fund |
GAM Multibond Absolute Return Bond Fund |
|
| Size |
$659.9m |
€1.03bn ($1.27bn) |
| Inception |
16 December 2009 |
30 April 2004 |
| Manager |
David Clott, Shawn Mato (since 2015) |
Tim Haywood (since 2004), Daniel Sheard (since 2006) |
| FE Crown Fund Rating |
**** |
*** |
| Fees (OCF) |
0.96% |
1.69% |
Data: FE, fund fact sheets
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