"We felt that if bond markets fell, they may struggle in other areas where skill was not obviously evident.”
He adds that he shared those views with Forest and colleagues at Abrdn at the time, and they respectfully disagreed with his views.
QE or not QE
Jason Hollands, managing director at Evelyn Partners, takes a somewhat different view as he feels that while QE did boost the returns from bonds and so make the target easier to achieve, the low-volatility environment also reduced the appeal of such products among financial advisers.
He says that while the current elevated levels of volatility in markets may mean that interest in absolute return funds is restored: “The challenge however is that a great many advisers, wealth managers and investors have lost faith in such funds and will be reluctant to allocate to them, especially as bonds – the traditional stabiliser for portfolios to be held alongside equities – are now back on the radar again, given higher yields.”
Another factor likely to be central to the review is the economics of the product. The key investors information document for the fund lists the ongoing charges at 1.32 per cent.
When the fund was £18bn in size, that 1.32 per cent would have generated revenue in the region of £230mn for Abrdn, at the present £1.2bn in size, the fund would be generating around £14mn in revenue.
All of the above leaves much to ponder for those reviewing the fund at Abrdn, and for those advisers considering allocating to a product that was once a staple of client portfolios.
David Thorpe is investment editor at FTAdviser
