Diamond Ratings for Absolute Return Funds

Following the pension freedom reforms implemented in early 2015, absolute return funds have been gaining in prominence. In addition, when interest rates are low, these funds' popularity tends to increase as investors look at different investment strategies with which to grow their capital and protect against inflation while keeping the overall risk level low.

What makes a fund an absolute return fund?

Their investment strategies are outcome-oriented and principally defined by their objective of achieving positive returns net of fees, within a fixed time horizon. This return objective drives the funds' underlying investment strategies and asset mix, unlike a traditional fund where this order is reversed. 

Due to the variety of underlying strategies and assets involved, Defaqto saw a clear need to implement Diamond Ratings on these funds. In doing so, we have taken account of traditional fundamental measures of a fund managers skill, as well as factors unique to absolute return such as batting average and drawdown risk.

Find out more about our approach to rating absolute return funds

Share this