ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Record outflows for GARS, but it is not the worst multi-strategy fund

Standard Life Investments (SLI) reported strong outflows from its GARS fund, the largest actively managed fund Ucits fund, on Friday. While the fund has failed to generate returns in recent years, some funds that have done even worse continue to generate big inflows, however.


PA Europe

The SLI Global Absolute Return Strategies fund saw net outflows of €3.1bn over the past 12 month, even though the fund is still huge in size at €12.1bn. The UK-domiciled version of the fund saw another £1.2bn (€1.4bn) in net outflows.

The GARS fund was an outlier in the absolute return space in 2016, as bad performance does not necessarily translate in outflows. While almost all of its competitors also registered disappointing performance, most of these funds continued to see net inflows: very strong net inflows even. Seven multi-strategy funds saw net inflows in excess of €1bn, according to Morningstar data.

Fund flows exceed net assets

Ironically, one of the worst performing funds in the multi-strategy universe, the JP Morgan Global Macro Opportunities fund which is down 11.2% on a one-year basis according to FE Analytics, managed to take in more money than any other fund in the category.

The JP Morgan Fund, which has one of the longest track record in the industry having been founded in 2004, saw €4.4bn in net inflows in 2016. Over the previous 3-year period, the fund has even seen more than €6bn in net inflows.

Its total net assets, however, are more than €1bn below that number! Even though the fund has made a net return of 50% over its entire lifespan, it seems most investors got into the JP Morgan Global Macro Opportunities Fund at the wrong time, and have lost a lot of the money they originally committed to it.

It’s the story of many recent investors in absolute return funds. However, the asset class still remains popular as equity markets are riding a record high. In January, European investors committed a sum of €1.7bn to multi-strategy funds alone according to Morningstar data. You never know when markets crash next. And that’s when absolute return funds are supposed to show what they’re really worth.