Last week Citywire investigated the outflows of Aberdeen Standard’s Global Absolute Return Strategies (Gars) fund and found it had lost £17.2 billion from the strategy since the beginning of last year.
Outflows from the UK version of the fund alone amounted to £9.8 billion with it falling from £20.7 billion to £10 billion over the period.
The piece revealed outflows were not only endemic in Gars but other competitor mixed assets funds such as Invesco Global Targeted Returns (GTR) and Aviva Investors Multi-Strategy Target Return (Aims).
It is clear that many IFAs have lost patience with Gars and sold out due to the underperformance. However some advisers are still sticking by it in the hope that it will once again come good.
One IFA who has remained invested is Jo Little (pictured below), chief executive of Hemel Hempstead-based Emery Little.
She said she uses Gars mainly for diversification in client portfolios.
‘We use absolute return funds within our core portfolios as an alternative defensive element to commercial property funds and bonds,’ Little said. ‘The defensive part of our portfolios look to dampen volatility in the market.’
Little said she was concerned about the impact of Aberdeen Asset Management’s merger with Standard Life. She sold out of Aberdeen Emerging Markets and Aberdeen Asia Pacific Equity funds because she thought the merger would disrupt the behaviour and performance of the funds.
However, she was less concerned about the deal’s impact on Gars and did not think it would disrupt management of the fund.
But what of Gars’ outflows and underperformance? Little said she was monitoring this but has been comforted by the fact Standard Life continues to use Gars for its own defined benefit scheme.
‘This [underperformance] is something we are keeping a close eye on,’ she said. ‘One of the things that has given us some confidence historically is Standard Life’s decision to use Gars in its in-house pension – effectively putting their money where their mouth is.
As Gars has shrunk in size many IFAs have sold their positions in the fund. Once such adviser is Jeffrey Deans (pictured below), managing director of Glasgow-based Save & Invest.
Deans said he initially invested in Gars after meeting its management team and felt it was a low volatility fund that could be used to help clients taking income out of their portfolios.
‘We never considered the fund as low risk but [it was] low volatility and could play a small part in a client’s overall portfolio,’ he said. ‘It was used in a limited manner with the objective of it being at the base of a portfolio. Should a client require capital at a time when equity markets were down, then Gars could be accessed.’
However in November 2016 Save & Invest decided to disinvest from Gars because it felt there were ‘too many different strategies being deployed over relatively short time periods’.
‘Our view was that any absolute return fund that was invested on a macro basis with a large range of complex instruments and strategies should be limited in clients’ portfolios, to no more than 5%.’
He said the firm got out of Gars ahead of the ‘deluge of encashment’ that came when performance deteriorated in 2015.