‘We lost money due to Brexit, Trump and oil’

The Daily Telegraph - Your Money - - INVESTING FUND OF THE WEEK -

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

The trust has a to­tal cost (the “OCF” or “TER”) of a year. Be sure to buy the right “share class”, which is “1”. The in­vest­ment shop through which you buy the fund will also levy a charge. Some will charge


a per­cent­age of the amount in­vested, oth­ers will ap­ply a flat an­nual fee. Our colour coded ta­bles at

tele­graph.co.uk/ in­vest­ing

will guide you to the cheap­est fund shop for your cir­cum­stances.


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