Absolute Return | How Does It Work with Examples and Advantages? Absolute return refers to the actual return earned by an investment over a period of time without considering any relative benchmark or any other measure of performance. It is the simplest form of comparing return from an investment and is also known as Total Return.
Why do hedge funds use absolute returns?
The adjective "absolute" is used to stress the distinction with the relative return measures (often used by long-only stock funds) that are based on comparison to a benchmark. The hedge fund business is defined by absolute returns.
What is an absolute return index?
The term absolute return index refers to a stock index designed to measure absolute returns on investments in hedge funds .
Why should I add absolute return funds to my portfolio?
The very aim of adding the absolute return funds to the portfolio is to enhance the risk-adjusted return of our portfolio, coupled with a higher level of return at the expense of the least volatility. The below mentioned formula shows how to calculate absolute return for an investment.
