Absolute Return Funds

Absolute return funds deal with the amount of return that a specific asset generates over time. Stocks and mutual funds, for example, will either depreciate in value or appreciate in value over a certain amount of time. Absolute return funds cover a wide range of investment opportunities worldwide and many different sectors. The flexibility that is involved with absolute return funds promotes an appealing investment choice for many investors. Absolute return funds are also called “absolute gain without the pain.” Whether the economy is in good shape or not, and whether interest rates rise or fall, absolute return funds will earn gains.

Traditional funds like mutual funds aim to either beat a certain set amount, or keep on track with a certain set amount. Mutual funds are considered more “relative” when compared to absolute return funds. Since 2005, the number of funds that deal with absolute returns has raised to 22 funds. Absolute return funds are said to be extremely difficult to manage in order to produce gains regardless of in what state the markets are in. There are a few different approaches that investors can take when investing in absolute return funds. Which approach, they will take depends on their overall objectives they are planning to meet.

Some absolute return funds deal with only purchasing stocks. Most of the type of investments that absolute return funds deal with is bonds. Commodities and other types of investments can also be found with absolute return funds. This wide range of different avenues that investors can take when investing in absolute return funds, provides an environment of opportunities. Long term investments with absolute funds consist of purchasing securities that investment firms and brokers are predicting will appreciate over the long haul. During this time of the long term investment, management teams or investment managers can adjust investments to avoid possible falling interest rates.

The amount of flexibility with absolute return funds when dealing with long term investments helps to reduce risks. Money can be borrowed from hedge funds that allow long term absolute return funds to cumulate gains regardless of the economy’s situation. The two most prominent investment firms found in the category of long term absolute return funds are Goldman Sachs Tracker and the Nakoma Tracker. Morningstar alone has well over 90 different funds that are in someway attached to absolute return funds. The reason why such big corporations are involved with funds like these is because of the amount of security that they provide for investors.

The objective that absolute return funds are after is a total return in many different ways. The different approaches that can be taken when investing with absolute return funds meet the many different demands of investors with various strategies. These absolute returns are possible even during a time of high inflation. Many investors scratch their heads wondering why this is common with these types of funds. The answer has everything to do with the fund’s ability to be involved with commodities like precious metals that often times outperform everything else during inflation.

Even though absolute return funds show a significant amount of stability over long term investments, short term investments show mixed reviews. Some absolute return funds even show a negative return. These negative returns can be attributed to either poor investment management or poor strategies by the investor. There will always be a certain level of risk involved with almost all investments. Before getting involved with absolute return funds, make sure to create an intelligent investment plan and use a brokerage firm that has a proven track record of success. Absolute return funds definitely provide an alternative way to generate gains through a tough economy.

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