‘We lost money due to Brexit, Trump and oil’
Despite a hugely complicated approach, Standard Life Investment’s Global Absolute Return Strategies, better known as Gars, is Britain’s biggest investment fund. It was spun out of a fund designed to fill the shortfall of the insurance company’s staff pension scheme and now has nearly £26bn of assets, of which around a third are from retail investors.
In line with other “absolute return” funds, which seek to hand investors a return in all market conditions, Gars has had a torrid time of late.
Over the past year the fund lost £717m of investor money, we calculate, while its peers returned 2.2pc. The FTSE 100 rose 22pc.
The past 18 months have been bad enough to mean that since the fund was launched a decade ago, it has achieved less than its target return of 5pc above the returns on cash.
Roger Sadewsky, one of five senior portfolio managers, tells Telegraph Money about a call that paid off on Australian interest rates and why its army of investors should keep faith.
How is the fund managed and what does it invest in?
We do not have a star fund manager like you might see elsewhere. Here everyone is encouraged to come up with ideas. We have a 70-strong team that is dedicated solely to Standard Life Investment’s multi-asset funds, including Gars.
We aim to generate a return of 5pc on top of what you would earn on cash, before fees are taken, each year. That’s akin to the return on the stock market but we aim to do that with far less extreme highs and lows than you see in the market.
We can invest in any assets we choose and, unlike a lot of funds, we don’t have a fixed proportion invested in shares or bonds. If we don’t like something we won’t be in it at all.
There are up to 30 different investment strategies being used in the fund at any one time. They can be very simple, such as exposure to European stocks or global subinvestment grade bonds.
But we can also be very granular and technical, for example, using insurance contracts to profit when interest rates in America will rise. As a result we built a more robust portfolio. If some trades aren’t working we tend to have other trades offsetting that.
What would you say to investors concerned about your recent poor performance?
We have had periods of flat or underperformance before. It can take longer for some of the strategies to start performing. Our bet on American banks in the middle of 2016 was painful, for instance.
The American economy was strong, but the Federal Reserve held off raising rates for longer than we expected. Quantitative easing was a more powerful force than we thought and we were a bit exposed.
There were also three significant shocks last year. The price of oil collapsed in February, the unexpected Brexit vote in June and the election of Donald Trump, with a clean sweep in the Senate, in November.
Our investors already started to see better returns towards the end of 2016. Overall, we’ve hit our return target 75pc of the time since 2007. Last year was disappointing but we’re starting to see the returns our investors expect.
At £26bn it’s Britain’s biggest fund. Sam Brodbeck asks one of its managers why it’s faring so poorly
What was your best investment decision?
Three stand out. Heading up to the 2008 financial crisis, the fund didn’t hold any corporate bonds and then topped up when things recovered. We were also very early to spot Australian interest rates were going to have to be cut in 2011.
A slowdown in the Chinese economy had a big impact on commodity prices, which Australia relies on, so they had to cut rates. We also avoided the sudden 40pc appreciation of the Swiss franc in 2015, which forced several brokers out of business entirely.
Do you have your own money in the fund?
Yes. I have both my Standard Life pension invested in Gars as well as my own and my family’s personal investments.
What would you have become if you weren’t a fund manager?
I considered becoming an economics and history teacher. It would have to be something that combined scientific rigour and satisfied my curiosity. Exposure (SLI Gars does not provide individual holdings data)
How to buy the fund as cheaply as possible
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