Adviser demand for absolute return funds

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There is growing adviser demand for funds focused on absolute returns and capital preservation despite market volatility, according to fund manager Pengana Capital.

"The interest in and take-up of  funds that focus on generating absolute returns rather than returns relative to an index has increased significantly over the last year as advisers seek ways to maintain capital and produce reasonable returns in the face of volatility and stretched equity market valuations,” said Pengana’s distribution director Damian Crowley.

He believes it is adviser demand which prompted the Pengana Australian Equities Fund to recently be added to the Federation Managed Accounts platform.

Since it began in July 2008, the Fund has generated positive returns of 13.2% p.a. to 31 December 2013. The Australian share market (All Ords) generated 4.5% p.a. over the same period, according to Pengana.

The Fund – which recently passed $350m in FUM – is different from others in the market as it has a key focus on capital preservation and downside protection.

Pengana said it has a “commonsense investment mandate” which allows it to hold up to 100% in cash if suitable investments cannot be found and a concentrated portfolio of 20-25 stocks. 

The top five holdings in the Fund as at 31 December 2013 were:

DUET Group
ANZ Bank
Telstra
Resmed
National Australia Bank