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Rating:WSJ Places Absolute Return Funds Under the Microscope Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, June 17, 2009

WSJ Places Absolute Return Funds Under the Microscope

by: Kimberly Chin

Product and sales executives from Putnam Investments, Legg Mason and Invesco Aim would want to pay extra attention to Wednesday's Wall Street Journal Fund Track column. In it, Sam Mamudi examines the marketing pitch for absolute-return funds, and also speaks to skeptics.

Putnam launched four absolute return funds in January. Also this year, Invesco Aim rolled out the AIM Balanced-Risk Allocation Fund. Legg, for its part, unveiled the Legg Mason Primal Tactical Allocation Fund in April.

Among those quoted in the article include Scott Wolle, who runs the AIM fund, and Morningstar's John Coumarianos and Ryan Leggio. the Fund Action column of the Wall Street Journal this morning, Sam Mamudi writes about the new product lines of Putnam Investments, Invesco Ltd., and Legg Mason. The firms are tapping into a new market of mutual funds, one that minimizes losses and provides "greater protection."

Putnam, which is part of Great-West Lifeco has launched its absolute-return funds this year, and Invesco has released its AIM Balanced Risk Allocation Fund which acts on risk-management investments. Additionally, Legg Mason's Permal Tactical Allocation Fund is one of those new kinds of funds that was launched in April. It is the first fund that is managed by its Permal affiliate.

The firms hold the stance that their new products will bring returns regardless of market conditions. However, skeptics question whether such claims can hold. Last year had shown that no fund is invulnerable to the economic meltdown.

Mamudi contends that although the new funds are packaged around alleviating investors' fears in the bear market, the new funds have brought skeptics, especially since they are challenging pre-existing formulas for mutual funds. He also adds the criticism that the funds also come with higher fees and because investors cannot see institutional performance, there is a lack of track record.  

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