Question

Explain absolute return funds

Answer 1

Absolute return funds are funds that produces positive returns irrespective of what the market conditions are.Hence, even if the markets are giving negative returns ,abosulte return fund may still provide the investor positve return.

They are difference from the traditional funds becasue of the following reasons

1) deploy techniques to generate positive results even if the markets goes up and down

2) Correlation with the return of other assets and investment is low

3)Does not have any index or sector as a benchmark

Some of the key techniques used by the absolute return funds that are different from the traditional funds are short selling of stocks and index, futures, options, other derivatives, arbitrage, leverage, etc.