RJ and Makay

Meanwhile, in the past few months, the absolute return asset class has been back in the news. Putnam investments launched four of these funds in January 2009, and according to its survey of 265 advisors, 59% said they were at least somewhat likely to recommend absolute return funds to clients, while one in five said they were “very likely.”  However, these funds can lead to confusion. It’s not just the phrase “absolute return” that is the cause, but it’s also how these funds are presented by companies.

These investments are supposed to always produce positive results that are not tied to the broader markets. However, in 2008 and part of 2009, much of this asset class did not post positive returns. Some financial professionals dismiss this as being off base because, with absolute return funds, it is important to think in broader terms, rather than absolute. For example, these funds did not lose nearly as much as the S&P 500 during the economic crisis. Also, a broader timeline needs to be used to obtain a meaningful view of their performance, which means that if the funds lose money one year, then look at the three-year returns.