Yet that is what precisely what the brains behind a brand new kind of funding fund claimed in 2008, and buyers and monetary advisors threw cash at them. But as an alternative of earning money, they worn out big sums.

The fund was often known as the Standard Life Global Absolute Return Strategies, known as GARS within the trade, and it grew to be the UK’s single greatest funding fund price a staggering £27billion at its peak in May 2016.

It impressed a number of imitators, together with Invesco Global Targeted Returns, launched in 2013 by three managers from the GARS fund.

Absolute return funds had been aimed toward cautious older buyers, a lot of them pensioners, who wished to beat the returns on money whereas avoiding inventory market volatility within the aftermath of the monetary disaster.

Absolute return fund managers tried to do that by holding a variety of asset courses with totally different danger profiles, resembling shares, bonds and property.

They additionally adopted specialist buying and selling methods, resembling shorting shares (betting they are going to fall slightly than rise) and utilizing complicated monetary devices resembling derivatives.

Instead of giving buyers the most effective of each worlds, they received the worst.

Absolute return funds turned outsized, overcomplicated and oversold by credulous unbiased monetary advisers.

I've been slagging them off for years.

Instead of earning money in all forms of market situations, the one superpower GARS had been given was the flexibility to lose cash, yr after yr.

In the six years after May 2016, it collapsed from £27billion to only £1.7billion, as buyers fled for the exits to flee its dismal efficiency.

GARS struggled proper to the top, falling 9.6 p.c in 2022 and one other 8.8 p.c this yr, earlier than new proprietor fund supervisor Abrdn lastly pulled the plug in July.

It's one of many greatest disasters the fund administration trade has inflicted on its clients, bearing comparability with the Neil Woodford debacle.

Absolute return fund managers received too large for his or her boots and promised issues they could not ship. While IFAs swallowed every little thing they had been instructed.

The trade has nonetheless made a heap of cash in charges and fees. Private buyers may have misplaced it.

Absolute return funds had been designed to present uncorrelated, regular returns, one thing buyers had been crying out for after the monetary disaster, says Darius McDermott, managing director of funding platform FundCalibre.

More than 100 funds had been launched in whole, however understanding what they did was by no means straightforward, as every had totally different methods and danger ranges. “Some were equivalent to hedge funds while others borrowed heavily to invest, further piling on the risk,” McDermott stated.

Instead of delivering regular returns some took too many dangers and rocketed one yr, then crashed the following.

Even when funds did rise excessive annual administration fees of 1.25 p.c or extra eroded a lot of the features.

Invesco Global Targeted Returns has additionally flopped, however in contrast to GARS remains to be limps on.

It goals to realize a optimistic whole return in all market situations over a rolling three-year interval, however during the last 5 years it has fallen an embarrassing 0.8 p.c.

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McDermott stated one or two funds can maintain their heads up, notably the Artemis Target Return Bond and BlackRock European Absolute Alpha.

Yet over three years these funds have delivered a complete return of 4.3 p.c and seven.7 p.c respectively, in line with Trustnet, which is nothing to jot down residence about.

John Moore, senior funding supervisor at wealth supervisor RBC Brewin Dolphin, stated absolute return funds have misplaced their promoting level now it's attainable to get a good return on money once more, with no outsize charges consuming into returns.

Most absolute return funds have been an absolute failure.

Fund managers had been as soon as the superstars of the monetary companies trade, however have since crashed to earth.

It's a staggering proven fact that three quarters of actively managed funds commonly fail to beat their benchmark over any interval you care to call.

Three quarters!

They nonetheless accumulate their profitable charges, although.

And even those that do beat their benchmark not often repeat the trick. Mostly, it is pot luck. The vastly in style Scottish Mortgage Investment Trust lost half its value last year and hasn't recovered.

Most buyers will fare higher with a low-cost index monitoring change traded fund (ETF), that passively follows share costs up and down slightly than making an attempt to beat them, and maintain for a minimal 5 years and ideally longer.

To cut back danger, put a few of your financial savings in a greatest purchase financial savings account.

Fund managers haven't got superpowers, however some have wreaked huge wealth destruction worthy of a Hollywood supervillain.