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Best Absolute Return Funds UK – Invest with Zero Fees

Absolute return funds are a valuable tool for investors and a growing trend within the financial investment sector. These funds essentially aim to deliver a positive return regardless of whether the market in which they invest rises or falls.

In this guide, we are going to cover everything you need to know about absolute return funds. We list and review the best absolute return funds in the UK, determine if it’s the right investment for you, and show you the process of how to get started.

Best Absolute Return Funds UK List

Below we review in detail how each absolute return fund performed, and what are the characteristics of each fund. However, to get a quick recap here’s our best targeted absolute return fund UK list.

  1. The PIMCO Active Bond Exchange-Traded Fund – Overall Best Absolute Return Fund UK – Invest Now
  2. Premier Multi-Asset Absolute Return Fund – Top Performing Absolute Return Fund – Invest Now
  3. LF Ruffer Absolute Return Fund – Low Volatility and Positive Returns – Invest Now
  4. Janus Henderson UK Absolute Return Fund – Solid and Safe UK Fund 
  5. Jupiter European Opportunities Trust – High Risk/High Return Fund
  6. Standard Life Global Absolute Return Strategies Fund – Low-Risk Fund 
  7. M&G Absolute Return Bond Fund – UK Fixed Income Absolute Return Fund 
  8. BlackRock UK Equity Absolute Return Fund – Best to Get Exposure to the UK Equity Market
  9. FP Argonaut Absolute Return Fund – Best Fund for Diversification 
  10. Aegon UK Equity Absolute Return Fund GBP – Best Absolute Return Fund for Long Term Investors

Best Absolute Return Fund to Invest in Reviewed

Choosing the best absolute return fund might be a daunting task to deal with. You’ll have to consider the past performance of the fund, the markets in which it is invested, the fees, and the organization that is responsible to manage the fund.

To help you find the right direction, we have reviewed each one of the best absolute return investment funds in the UK.

1. The PIMCO Active Bond Exchange-Traded Fund – Overall Best Absolute Return Fund UK

PIMCO is one of the largest and most well-known investment managers in the world with around $2.21 trillion in assets under management as of December 2020. Founded by the American superstar bond fund manager Bill Gross, Pimco has 93 funds in various regions including the United Kingdom including the Pimco Active Bond ETF that is one of the most liquid and stable funds offered by the global investment firm. This fund holds a huge number of 1149 assets and has an estimated yield to maturity rate of 2.48%.

In general, the fund seeks fixed income and long-term capital appreciation, regardless of the market conditions – making it among the most popular absolute return funds in the world. Crucially, since inception, the fund has outperformed the benchmark markets with a consistent and stable price movement. If you have any concerns about high volatility, then this fund has an annualized volatility of just 3.73%.

The PIMCO Active Bond Exchange-Traded Fund All time chart

Furthermore, the fund has a net asset value of nearly $4.2 billion and an expense ratio of just 0.57%. Finally, it has a distribution yield of 2.71% and NAV total return (after fees) of 4.49% since its foundation. All things considered, the Pimco Active Bond ETF is one of the best absolute return funds out there.

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2. Premier Multi-Asset Absolute Return fund – Top Performing Absolute Return Fund

With 92 positive months over the last 10 years, this is one of the best multi-asset absolute return funds in the UK and globally. The fund invests in a range of assets including bonds, company shares, property funds, and alternative assets (over 60% of its portfolio is invested in alternative securities). Premier was the best alternative investment fund in terms of performance over the last year with a return of 13.28%, despite the coronavirus pandemic crisis. And, from the start of the year, the fund has a return of nearly 2%.

What’s more? Premier Milton has recently reduced the asset management fees on eight of the funds in its multi-asset arm including the Multi-Asset Absolute Return Fund. As such, the new ongoing cost to the fund (OCF) has been reduced to 0.99% from 1.21%.

Premier Multi-Asset Absolute Return fund 10 year chart

In our view – after the Pimco fund – which is a safe absolute return fund option – this fund is perhaps the best choice in the absolute return sector right now for those who are looking to invest in a diversified portfolio with a neutral focus.

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3. LF Ruffer Absolute Return Fund – Low Volatility and Positive Returns

If you are looking for low volatility and consistent returns, then you might want to consider the LF Ruffer Absolute Return Fund. Established in 2006, the fund has a simple goal – to generate positive returns regardless of how the markets perform. More importantly, this fund is more diversified than its competitors – it invests in Non-UK index-linked, illiquid strategies and options, cash, long-dated index-linked gilts, gold and gold equities, index-linked gilts, etc.

In terms of shares, the 10 largest equity holdings of the fund include iShares Physical Gold, Lloyds Banking Group, Barclays, BP Group, NatWest Group, Countryside Properties, Centene, Yara International, Cigna, and Royal Dutch Shell. The Fund’s net assets under management totaled approximately £4.5 billion, and it offers a dividend yield of 0.76% as of March 2020. The expense ratio – which shows the amount that an investment company charges investors to manage the fund – stands at 1.23%.

LF Ruffer Absolute Return Fund all time chart

In terms of market performance, the fund has generated 4.5% since the start of the year. The 1-Year return stands at 19.7% and more than 58% over the past 10 years. As a matter of fact, the LF Ruffer Absolute Return Fund is one of the best absolute return funds in terms of performance.

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4. Janus Henderson UK Absolute Return Fund – Solid and Safe UK Fund

Another defensive absolute return fund that aims to beat inflation and generate a steady yearly return is the Janus Henderson fund. In the past four years, this fund has generated an annual return of 3.4%, -2.3%, 4.8%, and 2.5%. And, so far in 2021, the fund’s return stands at 1.91%.

Ultimately, this fund has one target – To outperform the Bank of England base rate (after the deduction of charges) over a period of 3 years. It is, therefore, invests in shares and derivatives to take both long and short positions in companies in the UK, meaning it aims to provide positive return regardless of the future direction of the market. As such, it is considered a fairly safe investment fund. The overall portfolio composition includes 68.7% in cash and 30 .77% in stocks, meaning the exposure to the stock is relatively low when compared to other absolute return funds.

Janus Henderson UK Absolute Return Fund all time chart

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5. Jupiter European Opportunities Trust – High Risk/High Return Fund

Unlike all the other funds on our list, the Jupiter European Opportunities Trust is not a pure absolute return fund. This fund basically invests in securities of European companies, with a focus on companies that have a sustainable competitive advantage.

As such, the fund is exposed to the risk of a stock market crash or a correction in stock prices, so it’s a fairly high risk investment. Nonetheless, we chose this fund because it has a certain nature that is not similar to other ETFs that take positions against the entire market or a specific sector.

Since 2001, the fund is listed and trades on the London Stock Exchange (LSE) under the ticker symbol JEO.L. Its top holdings include SAP, Uniliver, Nordo Nordisk, Procus, Worldline SA, ASML, Essity, Elec De Portugal, Linde, and Deutsche Borse. The fund’s market cap stands at nearly $1 billion with a 1-year return of slightly above 10%.

Jupiter European Opportunities Trust all time chart

Shares of this best Jupiter Fund can be purchased on the LSE through a brokerage firm like eToro, which means you won’t have to pay annual management fees nor fixed trading fees when buying and selling the fund.

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6. Standard Life Global Absolute Return Strategies Fund – Low-Risk Fund

Launched in 2008, the Standard Life Global Absolute Return Strategies fund is another excellent option for investors that are looking for a low-risk investment that aims to provide positive investment returns in all market conditions. The fund is primarily composed of government bonds – this includes 21.56% in Future On Five Year Treasury Note, 14.63% in 10 Year Australian Treasury Bond Future Dec 20, 4.44% in iShares China Cny Bond Etf Usd Dis, 4.43% in Topix Core30 Future Dec 20, and 3.54% in Aberdeen Standard Liqdty (Lux) Euro Z3.

Crucially, the GARS differs from most other absolute return funds by using a broader range of investment strategies. Thus, this fund forms as a multi-asset fund, meaning it invests in a mix of different assets. Thus, the Standard Life Global Absolute Return Strategies fund has the potential to make money in falling markets as well as in rising or neutral markets.

Looking at the fund’s specifics – The current fund size stands at €724.7 million with a YTD return of 0.3% as of February 2021. However, the fund has generated a return of 4.1% over the period of 1 year.

Standard Life Global Absolute Return Strategies Fund 10 Year chart

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7. M&G Absolute Return Bond Fund – UK Fixed Income Absolute Return Fund

With about $1.6 billion in assets under management, the M&G Absolute Return Bond Fund is one of the best bond funds for those looking for a safe absolute return fund. This fund simply aims to achieve a total return of at least  2.5% a year, before any management charges are taken, and, in any market conditions over any three-year period.

As implied by the name, this is one of the best fixed income funds and focuses on fixed income assets such as the United States, Netherlands, Germany, the United Kingdom, Australia, and Japan, All in all, the fund is composed of bonds (47%), and cash assets (38%).

M&G Absolute Return Bond Fund 10 year chart

Further, the expense ratio stands at just 0.68% with an annual dividend yield of 1.87%. In terms of market performance, the fund has returned an annualized 6.35% between March 2019 to February 2020, and 1.8% between February 2020 to February 2021.

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8. BlackRock UK Equity Absolute Return Fund – Best to Get Exposure to the UK Equity Market

Another excellent option to invest in is the BlackRock UK equity absolute return fund, which aims to deliver positive absolute returns through a combination of capital appreciation and fixed income on investors’ investment regardless of market conditions. The BlackRock equity absolute return fund is an ideal option for those who are looking to increase their risk by getting exposure to equity securities and the equity market. The fund invests at least 70% in shares of companies domiciled in or have their primary listing in the United Kingdom.

BlackRock UK Equity Absolute Return Fund all time chart

All in all, the fund holds stocks of 69 companies including RELX plc, Rio Tinto plc, Reckitt Benckiser Group plc, Tesco, and more. In terms of market performance, the BlackRock UK equity absolute return fund is up 1.02% since the beginning of the year after having a negative return in 2020. In 2019, however, the fund has generated a return of nearly 10%.

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9. FP Argonaut Absolute Return Fund – Best Fund for Diversification

While most absolute return funds focus on a combination of shares appreciation and fixed income assets, the FP Argonaut Absolute Return Fund aims to deliver positive returns by combining long and short market stock positions. The fund is not as dominant as other absolute return funds in our list and finding data and information might be a challenge. Nonetheless, this is absolutely one of the best funds in the UK market in terms of the returns it generates.

Since its launch, the fund has generated over 118%. In 2020 only, the annual return stands at 16.6% and 12.8% in the year before. This year, however, the fund, so far, has a negative return of -1.4%.

FP Argonaut Absolute Return Fund classa a chart

This absolute return fund also has exposure in the United States, United Kingdom, Germany, Russia, Spain, Switzerland, Netherlands, Sweden, France, and Mexico. The FP Argonaut fund has three different classifications – A, R, and I – The fund’s management teams charges an annual ongoing fee of 1.65%, 0.9%, and 0.9% respectively.

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10. Aegon UK Equity Absolute Return Fund GBP – Best Absolute Return Fund for Long Term Investors

Like most absolute return funds in our list, the Aegon UK Equity Absolute Return Fund GBP has a market-neutral approach, which makes it a perfect investment solution for long term investing that provides a steady income without getting exposed to the risk of a stock market crash. With that in mind, the fund is more aggressive and heavily invested in leveraged and risky assets like the FTSE 100 Index (New Style) Future June 15, Ftse 250 CFDs, Gs Ka Energy Custom Gskaoeap CFD, GlaxoSmithKline PLC CFD, Unilever PLC CFD, etc.

Nonetheless, the fund’s return steadily outperforms its benchmark, the Sterling OverNight Index Average (SONIA). Since its inception in 2010, the Aegon UK Equity Absolute Return Fund has generated a return of 26.12%, and, in the last two years, and overall return of 12.49%.

Aegon UK Equity Absolute Return Fund GBP chart

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What are Absolute Return Funds?

Absolute return funds have been in existence for decades though this type of funds has rapidly gained popularity in recent years. As a matter of fact, the first-ever absolute return fund was created in 1949 by Alfred Winslow Jones, who is known as “the father of the hedge fund industry.” In simple terms, an absolute return fund, as the name implies, is a form of fund that aims to generate positive returns regardless of the markets’ direction in which the fund is invested in.

But unlike traditional funds that buy shares in companies they predict will rise in value, absolute return funds seek to buy or short sell assets without taking a side or direction in the market. In that aspect, the condition of the market – falling, rising, or neutral, is irrelevant to the success of the fund.

Why Invest in Absolute Return Funds?

The main reason to invest in an absolute return fund is that the investor remains neutral to the direction of the market, industry, or region. This differs from buying an ETF that has a focus on a certain market like lithium, gold, oil, silver, or the technology sector where the fund buys shares with the expectation that prices will rise in value in a bull market.

In many ways, an absolute return fund works the same way as a hedge fund that promises positive returns regardless of the condition in the market. As such, these funds often become very popular in times of uncertainty in the market – normally before and after a stock market crash.

Best Absolute Return Funds Brokers

After you have set up your mind on the one absolute return fund you want to buy, it’s time to find a UK-regulated brokerage firm that allows you to buy these assets. While there are plenty of stock rokers in the UK, only a few of them offer you to buy absolute return funds. With that in mind, below you will find two trusted and regulated online trading platforms in the UK to invest in investment funds.

1. eToro – Best Overall Platform to Invest in Absolute Return Funds 

Best biotech stocks UK available on eToroeToro is known for being the largest social trading platform with plenty of unique tools and features. This broker has more than 17 million members around the world and it keeps growing at an exponential rate. Crucially, eToro is a CFD platform, and thus it is more suited for short-term traders. With that said, the platform offers a huge range of the best ETFs and investment trusts with zero commission pricing structure including some of the most popular absolute return funds. As such, it is an ideal platform for buying ETFs and investment funds.

When compared to other online investment platforms, the good thing with eToro is that you do not need to pay any trading fees but more importantly, there are no account management fees and no rollover fees. This means you can hold the positions for a long period of time without paying any fees to the brokerage firm. As for absolute return funds available on eToro’s platform, you can find many investment trusts such as the PIMCO Active Bond Exchange-Traded Fund and Jupiter European Opportunities Trust.

Jupiter European Opportunities Trust. etoro

67% of retail investors lose money trading CFDs at this site

Another investment tool that is available on eToro’s platform is the built-in managed CopyPortfolios. While these are not classified as absolute return funds, the eToro’s CopyPortfolios are an effective way to get exposure to niche asset classes like gaming, cybersecurity, cryptocurrencies, autonomous cars, renewable energy, and more. Further, some portfolios (like the Dividend Growth CryptoPortfolio) work on the same principle as absolute return funds.

eToro copyportfolios

Lastly, eToro is not a traditional brokerage firm – It is the largest social trading network with approximately 17 million members that have the ability to connect with each other, share trading ideas, and copy trades of other investors. Using eToro’s most popular feature, the CopyTrade, investors can view the trading activity of other users and automatically mimic their trades.

eToro copytrade

eToro allows investors in the UK to open an account with a minimum of £140. However, if you want to test the platform before you risk your money, you can sign up for a demo account. In terms of the safety of your funds, investors at eToro are covered by the Financial Services Compensation Scheme (FSCS) up to the first £85,000. eToro is also regulated by the Financial Conduct Authority (FCA).

Pros:

  • Easy-to-use and user-friendly online trading platform
  • Buy shares, ETFs, and investment trusts without paying trading commissions and account management fees
  • Offers stocks, indices, commodities, forex, cryptocurrencies, and more
  • More than 2400 stocks listed on the UK and international markets
  • Support a range of payment methods: debit/credit card, e-wallet, or UK bank account
  • Ability to copy the trades of other users
  • FCA and FSCS protections

Cons:

  • Not suitable for advanced traders that like to perform technical analysis

67% of retail investors lose money trading CFDs at this site

2. Fineco Bank – Low-Cost Dealing Platform to Invest in Absolute Return Funds

Fineco logoAnother option to consider is Fineco Bank, an FCA-regulated brokerage firm that supports thousands of assets to trade on. Unlike eToro, Fineco Bank offers investors to buy assets in the form of CFDs or directly from the exchange, which means you’ll have a wider variety of investment funds.

The broker charges an annual platform fee of 0.25% on the first £250K, 0.15% for any value between £250,000 and £1m, and 0.05% for a portfolio value between £1m and £2m. If you have a portfolio with a value of above 2m, Fineco Bank does not charge any annual fees. Additionally, Fineco Bank offers a wide range of investment trusts from top fund managers such as Invesco, Jupiter, M&G Investments, Aberdeen Standard Investments, Igebris Investment, and more.

Fineco Fund Managers

Besides the platform annual fee, however, the broker does not charge any additional fees –  no hidden fees, spread, exit costs, or transfer fees and no dealing charge for buying or selling funds. To start investing in absolute return funds at Fineco Bank’s platform you need to invest a minimum of just £100.

Pros

  • Charges just £2.95 per trade when buying and selling absolute return funds
  • Access to thousands of UK and international shares, ETFs, and funds
  • Deposit funds with a UK bank account
  • FCA regulated
  • Established way back in 1999
  • Offers ISAs and SIPPs accounts
  • Supports the PowerDesk and web-based platform

Cons

  • 0.25% annual fee
  • No support for debit or credit cards

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How to Invest in Absolute Return Funds on eToro Tutorial

If you have come to the conclusion that investing in an absolute return fund is the right investment strategy for you, we are now going to show how to craft your investment plan with eToro.

Step 1: Open an Account with eToro

The first step involves visiting eToro’s website and register for an account. On the broker’s homepage, click on the Join Now button and then create your username and password, and submit your email address. To complete your registration, you then need to verify your email address and complete a questionnaire about your financial trading experience.

Register account eToro

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Step 2: Complete the Verification Process

After you have signed up for an online investment account, you’ll then need to verify your identity. As an FCA-regulated brokerage firm, the identification process is mandatory and requires a new user to upload a copy of a passport or driver’s license and proof of address that can be a bank account statement or utility bill.

Step 3: Deposit Funds

Before you’ll be able to place an order to buy a certain absolute return fund, you first need to fund your account. eToro allows UK investors to start investing with a minimum of just 200 USD (which is around 140 GBP). To make a deposit, the broker supports the most popular and common payment options including bank wire transfer, credit/debit card, PayPal, Neteller, and Skrill.

Step 4: Search for an Absolute Return Fund and Place a Buying Order

To make an absolute return fund purchase on eToro’s platform, you’ll have to search for the instrument trust you want to buy. Unfortunately, eToro does not have a list of all funds and trusts, meaning you’ll have to search for the fund by yourself. To do that, navigate to the search bar and type in BOND (or Pimco).

eToro pimco

After you click on the first result that appears in the drop-down menu, you’ll be channeled to a page where you can analyze the PIMCO Active Bond Exchange-Traded Fund. From this page, you get access to the Twitter feed, charts, and stats.

Pimco instrument page etoro

67% of retail investors lose money trading CFDs at this site

Once you are ready to make an investment, click on the buy button. Then, you will see an order form with several order fields. The first includes the type of order you wish to execute – a market or limit market order. For those unaware, the difference between the two is that a market order is a transaction meant to execute as quickly as possible at the best market price available. Limit orders, on the other hand, allow the investor to set the share price at which you are willing to complete the transaction.

Finally, you’ll also have to insert the amount you want to invest in the chose absolute return fund. This can be in units (shares) or an amount in USD/GBP.

eToro place order pimco

Conclusion

If you have ever experience the tension of investing in financial assets, then you probably know how stressful it might be, particularly when you are betting on a direction of a certain market. For that reason, an absolute return fund could be a great solution if you have no interest to be heavily involved in the stock market and at the same time, receive a positive return.

As such, if you are looking to invest in an absolute return fund, we suggest you choose one of the funds we have carefully selected in our list. Then, to buy the fund, we suggest you use one of our recommended brokers – eToro or Fineco Bank.

eToro – Invest in Absolute Return Funds UK with 0% Commission and No Stamp Duty

67% of retail investor accounts lose money when trading CFDs with this provider.

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About Tom Chen PRO INVESTOR

Tom is an experienced financial analyst and a former grains derivatives day trader specializing in futures, commodities, forex, and cryptocurrency. He has over 10 years of experience in the Finance industry spanning across a day trader position at Futures First, and a web content editor and writer at FXEmpire. Tom is an expert in the areas of day trading and technical analysis as it applies to futures, cryptocurrencies, forex, and stocks. Tom’s primary interests include economics, trading, social-economic systems, technology, and politics. He has a B.A. in Economics and Management, a Journalism Feature Writing certificate from the London School of Journalism. Tom has written for various websites, such as FX Empire, The Motley Fool, InsideBitcoins, Yahoo Finance, and Learnbonds.

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