HEAD-TO-HEAD: Blackrock versus Church House
By Rupert Walker, 8 Nov 19
FSA compares two absolute return products: the Blackrock UK Absolute Alpha Fund and the SVS Church House Tenax Absolute Return Strategies Fund.
Darius McDermott, Chelsea Financial Services
Absolute return funds have been maligned in the past few years for their failure to deliver the consistent positive returns expected of them, according to Darius McDermott, managing director, Chelsea Financial Services.
They have been criticised for their complexity and opacity, which often makes their strategies difficult to understand, with even their investment teams sometimes struggling to explain them. As a result, it is tough for advisers to conduct adequate due-diligence.
Absolute return funds have also been attacked for their poor performance, even compared with the low thresholds of their benchmarks, such as a deposit rates or Libor indices.
For instance, the UK’s Financial Conduct Authority, in a 2017 report, highlighted their failure to measure returns against stated benchmarks in fund marketing, and charging varying performance fees on top of the ongoing charges figure thereby making comparison between funds difficult.
FSA challenged McDermott to find and compare two absolute return funds that manage to defy these criticisms.
He came up with two funds that are available for professional investors only in Asia: the Blackrock UK Absolute Alpha Fund and the SVS Church House Tenax Absolute Return Strategies Fund.
“These are two funds which do what they say on the tin and have delivered,” he said.