Legal & General Diversified Absolute Return Fund

Andy Parsons, Advice Team Manager at The Share Centre, explains how investors seeking a fund that looks to offer positive returns when markets are in turmoil, might consider an absolute return fund.

The Legal & General Diversified Absolute Return fund aims to provide a positive return in all market conditions, and capital growth over the long term. To achieve this, it will invest principally in financial derivative instruments to gain either long or synthetic short exposure to a wide range of assets across all markets and currencies.

"The Legal & General Diversified Absolute Return fund is an absolute fund that will look to offer investors the opportunity to be diversified across a broad spectrum of asset classes, with the manager looking to undertake strategies such as being 'long' on one particular currency, whilst being 'short' on another.

"However, the arena of absolute funds is very varied and relatively new to the market.  Investors need to carefully read and consider the investment objectives as they not only vary in geographical coverage, but also in the types of asset classes and investment instruments used to obtain their results.

"It is important to note that by the very nature of looking to achieve positive returns in all market conditions, investors should be aware that during periods of a significant market rally, absolute funds will generally under perform.

"The Legal & General Diversified Absolute Return fund is managed by David North (also Head of Asset Allocation at LGIM) who has been at the helm since the launch in 2008.  The fund has an annual management charge of 1.50% and a standard initial charge of 5% - and despite having only launched late 2008, the cumulative performance of the fund over the last year shows a return of 12.83%, compared to a sector average of 2.16%.  Year to date the fund has returned 3.04% compared to a sector average of 0.41%.

"As the fund features in The Share Centre's Platinum 120 range, customers wishing to invest in the Legal & General Diversified Absolute return fund will not have to pay the initial charge or dealing commission on purchase.  Customers can also invest in the fund from as little as £10".