White Paper

Why Equities for Absolute Return?

David Schofield President, International Division

Key Ideas

As the outlook for market-beta returns deteriorates, investors are becoming increasingly focused on investment strategies with absolute return objectives based on alpha. Many commonly used absolute return strategies suffer from drawbacks such as liquidity, capacity, complexity and high fees. Large cap developed listed equities offer an abundant source of uncorrelated
alpha that is highly transparent, extremely liquid and far cheaper to implement in absolute return strategies than many competing, popular approaches to absolute return.

How did we get here?

You can’t eat relative returns. Absolute return strategies have come under the spotlight recently, but of course investors have always invested with an ‘absolute return’ objective. The purpose of investing, after all, should be to grow one’s capital, so expecting a positive absolute return on one’s investment over time, in exchange for the use of that capital, is nothing earth-shattering.