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Absolute-Return Funds: Not Always What They Seem

Friday, July 9, 2010 - 7:37 PM
From the Wall Street Journal
So-called absolute-return funds - portfolios that purport to deliver gains in any market environment - are hot. But many aren't living up to their billing.

Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708
1. Sunday, July 11, 2010 - 4:34 AM
From the same article:
Fund firms say that while managers are aiming for absolute returns, the ultimate goal is to reduce risk. "The term 'absolute return' may be a bit of a misnomer in the industry," says Theodore Enders, portfolio strategist at Goldman Sachs Asset Management, which runs the Goldman Sachs Absolute Return Tracker Fund. "We don't believe it's possible for any strategy to produce positive returns in all market environments. But absolute-return strategies are very effective at reducing risk."

Ken, if some of these overpaid "Asset Management Strategists" read your blog...  they'd know about that new investment called the LONG TERM CD.  Or maybe long term treasuries.  How can someone say it is impossible to produce positive returns in all market environments?  Unless he was referring to inflation adjusted... but I really don't think he was thinking that deep.
MikeMike327 posts since
Feb 22, 2010
Rep Points: 876
2. Sunday, July 11, 2010 - 6:39 AM
Like most portfolio managers, he doesn't even consider CDs.

I think Tom Adams says it well in his article series in which he has been comparing I Bond performance to the stock market performance. His focus is on Savings Bonds, but a similar case can be made with CDs:
Buy Savings Bonds because you can't get back less than you put in. They make a great foundational choice for the low-risk portion of your investment portfolio.

Ask 100 financial advisors whether stocks or Savings Bonds are the better investment for the long term, and all the ones who earn commissions selling stocks will tell you that stocks are always the better investment.


Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708