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The Global Absolute Return Strategies (GARS) approach aims to provide positive investment returns in all market conditions. The strategy has a cash* benchmark and targets a return of cash +5% per annum on a 3-year rolling basis. This is similar to the return historically available through a long-term investment in equities. Crucially, GARS is expected to meet this target with one-third to one-half of the investment risk associated with equity markets.
GARS adopts a truly active approach to diversified asset allocation, utilising a wide range of asset class exposures. Alongside dynamic allocations to traditional assets such as equities, fixed income and real estate, GARS exploits advanced sources of market, relative-value and directional returns. GARS is able to select strategies freely across geographies and markets, investing where its managers see the best return prospects within robust risk constraints.
GARS was initially developed to address the needs of the Standard Life Staff Pension Scheme and was implemented in November 2005. The core requirement was to minimise funding risk while also reducing the funding gap that had developed in the wake of increased market volatility. This is a similar situation faced by many UK pension schemes today. The success of GARS in achieving this goal has been a key driver in its adoption by an increasing number of schemes across the UK and around the world.
* 6-month London Interbank Offered Rate (LIBOR)
- Benchmark: Risk-free cash return (6-month London Interbank Offered Rate (LIBOR))
- Target: To outperform the benchmark by 5% per annum gross of fees on a 3-year rolling basis
- Expected volatility: GARS is expected to exhibit between one-third and one-half of the investment risk of a traditional portfolio with similar long-term return potential. In ordinary circumstances, volatility is anticipated to be between 4% and 8%.
These charts are for illustrative purposes only to provide information on our global absolute returns approach.
As GARS uses derivatives to implement many strategies, breaking the approach down by the percentage invested in each asset class doesn’t give a true reflection of its investment positions. To better represent the portfolio, we also measure and present each strategy’s contribution to overall risk.
The first pie chart below shows the actual physical allocation. The second includes derivative exposure to give a more informed view of the different market strategies and the diversified nature of the portfolio.