Absolute return funds are seemingly all the rage in mutual fund space but some advisors are warning against employing these funds altogether, Bloomberg reports.

Twelve absolute-return funds have begun since 2010, according to Chicago-based research firm Morningstar Inc., including the $3.4 billion Absolute Strategies Fund from Absolute Investment Advisers LLC [see profile], the Eaton Vance Global Macro Absolute Return fund [see profile], and the Legg Mason BW Absolute Return Opportunities Fund [see profile], which started Feb. 28.

However, advisors are reportedly skeptical of the new offerings. For most of the funds, “you don't have enough of a track record to make a prudent decision,” David O'Brien, head of O'Brien Financial Planning in Midlothian, Virginia, told the pub. And some funds by nature are "still risky,” according Robert Dowling, a financial adviser at Modera Wealth Management in Westwood, New Jersey.

And Robert Schmansky, founder of Clear Financial Advisors in West Bloomfield, Michigan, goes a step further in noting that absolute-return funds may not be worth the effort it takes to evaluate them and fit into a portfolio. He told the pub that investors should stick with bonds to reduce volatility in their portfolios. 

Edited by: Hung Tran


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