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Your Questions
ANSWERED
Absolute return
investments?
by DAVID LE CORNU
Do I need to consider them?
DIRECTOR,
Dawnay Day Milroy, Jersey
Yes, Yes, Yes. I am not one for sitting on the fence, I am To show you what I mean I have provided a chart below
100% convinced that every Investor should have at least that reflects the performance of our core absolute return
some exposure to absolute return investments. Those who strategy to global equity markets and cash over the period
know me well do not doubt my conviction as they know June 1998 through to July 2007.
that in 2006 despite being conservative with a capital C. I
left a comfortable position at a large Private Bank, increased A relative return manager focusing upon equity investments is
my mortgage and bought into Dawnay Day Milroy. Our likely to have lost his clients a lot of money during 2000,
Channel Island based firm focuses upon delivering absolute 2001 and 2002 and if he lost less than the market he will
return investment solutions. Enough about me lets move have considered himself to have done a good job. In contrast
onto absolute return investment it is much more an Absolute Return Manager is charged with generating
interesting... positive returns over specific periods of time. If he fails to do
this he would expect his Investment Mandate to be cancelled.
Before I can explain why you need to consider absolute
return investments I need to clarify exactly what they should 3 reasons why absolute return investments are appropriate
deliver and contrast this to relative return investments. for Private Investors
An absolute return investment will:- 1) Private Investors are naturally absolute return investors.
• Seek to deliver consistent positive returns irrespective of Consider and answer the four questions that follow:-
the movement of underlying markets i) What return do you need to achieve to motivate a
move out of cash?
A relative return investment will:- ii) How long can you commit funds for?
• seek to deliver returns in excess of the market that they iii) How big a loss can you tolerate?
invest in iv) How long would you be prepared to wait to recover the loss?
20/20 thirty
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