DRR Fund tops IMA Cautious Managed Sector

One year after launch, the IM Distinction Diversified Real Return (DRR) Fund is the top performing fund in the IMA Cautious Managed sector.

The multi-asset, inflation benchmarked fund gained 17.9% compared to the sector?s median fund return of 8.0%.

The IM Distinction DRR Fund had a maximum drawdown of 4.3%, while the FTSE 100 suffered a drawdown of more than 16% during the year.

The IMA Cautious Managed sector's average fund drawdown was 6.0%.

Strong returns were achieved with a low realised volatility of 6.1%, compared to an average volatility of 7.3% from the sector.

The Distinction DRR Fund delivered the sector?s top Sharpe ratio of 2.8, compared to 1.0 for the average fund.

DRR seeks long-term capital appreciation through a flexible and diversified asset allocation across all asset classes globally. Returns are generated from multiple sources across the diversified portfolio. Among the key drivers of performance were precious metals, water stocks, European dividends, Brazilian equities and commodity alpha strategies. As well as continuing to run these positions, the Fund has exposure to Utilities, inflation-linked bonds, copper, luxury and branded goods and a short volatility strategy.

Dr. Ana Armstrong, Chairman of Distinction Asset Management, comments, “The flexibility in our approach has been the key driver of the returns generated by the IM Distinction Diversified Real Return Fund. 2010 was a challenging year for all investors. Our methodology delivered much better returns when the broader markets were falling, and this was a key contributor to the IM Distinction DRR Fund topping the sector.”

Looking forward, Patrick Armstrong, co-manager of DRR comments, “One of the key risks the Fund is positioned for going forward is inflation. We expect short-term interest rates will remain near zero in the major Western currencies throughout 2011 and expect new announcements on quantitative easing as unemployment remains stubbornly high. The most important thing investors can do today is position their portfolios for much higher future inflation. Allocations to government bonds do not make sense at current yield levels, given that they offer a negative real returns with CPI at 3.7% and rising. Inflation will continue to be a major theme for the coming decade.”