Absolute return
Absolute return is the measure of the absolute increase in the value of an investment over a given period of time. It contrasts with the relative return, which refers to the measure of the better performance relative to a comparison benchmark (see also alpha factor ).
Absolute return is found primarily as an advertising promise for some alternative investments , according to which, unlike traditional capital investments ( investment funds , stocks , interest-bearing securities ), the manager tries to achieve constant capital growth (absolute return) in every market phase, if possible without fluctuations ( volatility ) achieve. Specifically, this can be done, for example, if the manager always selects those investments on the capital market for which he expects an absolute return in the next investment period. More typical, however, is that the investment guidelines allow the use of short selling . The manager then makes a speculative assessment of the future market development and if this indicates a bear market , he still tries to bring about an increase in value by selling short. However, the risk of bad speculation remains with the investor as the products do not guarantee speculative success.
Absolute return should not be confused with total return , which refers to the total return on an investment including interest paid and taxes paid.
criticism
The US financial writer Larry Swedroe points out that the HFRX Absolute Return Index , which measures the average performance of hedge funds with an absolute return strategy, lost 13.1% in 2008 and 3.6% in 2009 2010 showed a loss of 0.1%. Absolute return products are another financial product that is only designed to be sold and not bought. Nobody should invest money in it; the only serious product with absolute return are (in the USA) treasury bills ( financial resources with a term of up to one year).
Individual evidence
- ↑ CBSNews.com: Why You Should Absolutely Avoid Absolute Return Funds