What are absolute return funds?

Absolute return funds are funds that aim to turn a profit for its investors, regardless of the direction of the market. Absolute return funds stand in contrast to relative return funds, which aim to outperform the market.

What is the relative return of a mutual fund?

The relative return of a mutual fund measures how well a mutual fund has performed compared to its benchmark. For example, if you own a mutual fund with a return of 10% and the return of its benchmark is 7%, then the relative return is 3%. The absolute return is simply the return of the mutual fund. In this case, the absolute return is 10%.

What is a'real Return' Fund?

A type of fund that aims to deliver an absolute or 'positive' return, whatever happens in the stock markets. Lower volatility is also part of the promise of this 'all-weather' variety of fund. They were enthusiastically marketed to private investors from 2005 onwards, with some being called 'real return' or 'multi-strategy target income'.

How important is absolute return & relative return?

Keeping absolute return and relative return in perspective matters when deciding how to invest. Absolute returns offer a snapshot of how an asset or investment has performed during a specific window of time. Using this metric to construct a portfolio typically centers on one goal: driving positive returns as much as possible.