Infographic: Absolute Returns
For fund trustees to get the best possible returns for their members’ retirement funds over the long term, they need to include more inflation-beating growth assets such as equities, which have been proven to outperform all other asset classes over the long term. Cash might be low-risk but it doesn’t keep up with inflation.
However, exposure to higher growth assets also exposes funds to volatility (market ups and downs) and capital fluctuation in the shorter term, because equities are the most volatile of all the asset classes.
For peace of mind, trustees need a smoother journey to achieving their members’ retirement goals!
Trustees need to get the best possible returns for their members without undue exposure to short-term capital fluctuations.
An appropriate solution would be a product that is able to both:
- reduce fluctuations (ups and downs) in returns as much as possible over any one year period
- still get the highest possible real returns (growth over and above inflation) over a three to five year period.
These two essential goals are exactly what our absolute return products are designed to achieve and have been ably delivering for many years on clients’ required returns, while avoiding the numerous potholes along the way.
They do this through actively managing the risks along the way, by employing skillful tactics such as derivatives and tactical asset allocation, represented by the tunnels and bridges for a safer passage. For these capital protection strategies, there is a small premium that is attached.
Overall, these ‘toll road’ strategies are effective in ensuring a safer, low-risk journey (ie preserving capital in volatile markets), while still maximising returns for retirement fund members over the longer term to achieve the end goal: a successful retirement outcome.
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