...Absolute Return (AR) Funds Show Resilience Amid Volatile Market Conditions 80% of funds had positive returns in 2014 (like 2013), averaging 3%. AUM continued to increase, albeit at a slower pace, reflecting investors' appetite for AR strategies. Drawdowns were less severe in October 2014 than in June 2013 or July 2011, with a shorter time needed to make up for losses. Poor diversification in themes, bets and time horizon (particularly on short-duration trades) hurt performance, while model discipline, low cost option strategies, technical and trading skills helped to navigate inflection points. AR Funds Show a Carry/Yield, Short Volatility Bias AR funds have typically shown a carry, long (credit), short volatility market bias over the past few years, participating in the "reflation trade" amid decreasing market volatility. This component of return drivers has diminished as income expectations have reduced. Nevertheless, this bias suggests that AR funds are more driven by yield than pure...
