Absolute Return Fund

An absolute return fund promises gains without the pain. These funds are designed to make money whether the market is going up or down. To generate an “absolute” return, these funds mix “longs” – the traditional way to invest - and “shorts” which is to take bets on a market tumble by using derivatives or short-selling shares. They also seek to spread the risk by investing in many asset classes, bonds, equities, currencies or commodities. These funds may charge hefty fees – as much as 2% of assets under management – and as much as 20% of profits. Introduced in 2008, this type of fund is one of the newest and fastest growing investment vehicles.

Putnam Makes Move to Address Sequence of Returns Risk in Target Date Funds

Putnam, a large Boston-based money manager with $110 billion in assets, plans to move from 10 to 50 percent of the assets currently in its target date mutual funds into four different absolute return funds. The move serves as a confirmation of the hazards that sequence of returns risk presents to near retirees and those who are recently retired. As recently reported by Bloomberg, target date funds have come under increasing regulatory scrutiny as funds that are intended to serve investors...