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Global Absolute Return Strategies Fund (GARS)

Frequently asked questions

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Q. What is GARS?
A. GARS is the Global Absolute Return Strategies Fund from Standard Life, a new investment fund managed by Standard Life Investments. GARS is an absolute return fund – most other investment funds are relative funds.
Q. What is the difference between an absolute return fund and a relative return fund?
A. Most investment funds available in the Irish market are classified as relative return funds – their objective is to outperform an average fund or a stock market index.
An absolute return fund is different because the primary objective of the fund is to produce positive returns each year. So the client’s objectives and the fund manager’s objectives are similar.
Q. What is the performance target of GARS?
A. The performance target is to achieve an annual return of cash plus 5% (gross of fees) over a rolling 3 year period. Cash is defined as the 6 month European Interbank Offer Rate (Euribor) - the interest rate banks use as a reference when lending to each other.
Q. Does GARS have a track record?
A. Yes. The fund was launched in the UK in June 2006 and has produced a annualised return of 6.01% (gross of fees) to 26 August 2008. The size of the fund at August 2008 was 500m.
Q. What is the volatility rating of the fund?
A. All Standard Life investment funds have a volatility rating of between 1 and 7 where 1 is more stable and 7 is highly volatile. The GARS fund has a volatility rating of 3 out of 7. The Standard Life Managed Fund has volatility rating of 4 out of 7.
Q. What is the main difference between this fund and a managed fund?
A. This GARS fund has a lower volatility rating than a managed fund and will invest in a broader range of investment opportunities than a managed fund. A managed fund typically generates returns from market returns and stock selection. The GARS fund goes two steps further by investing in opportunistic and relative value investment strategies. (see below)
Q. Where and what does the fund invest in?
A. The fund is a global investment fund so can invest in different assets and applies different investment strategies across the globe. The fund may not invest more than 40% of its total investments in any one of the following four investment strategies:
Market returns – traditional strategies such as equities, bonds and property are expected to provide good long term returns.
Stock selection - Returns attained through either outperforming or underperforming relevant market indices
Relative value - is an opportunity where an asset appears to offer better value relative to another. We can exploit this difference to generate positive absolute returns.
Opportunistic – we take positions on specific market opportunities that aim to deliver positive returns on a three year view.

Q. What is the maximum the fund may invest in equities?
A. The fund may not invest more than 40% in any one investment strategy, i.e. the maximum the fund may invest in equities is 40%. The maximum that the fund may invest in any single sub strategy is 30% (so the fund may hold up to 40% in equities but no more than 30% in European equities for example.)
Q. How many different investment strategies are there in the fund?
A. The fund is currently invested in 25 different investment strategies. It is expected that the fund will hold between 15 and 30 different strategies at any given time. Each strategy is bought on a three year time horizon however the fund manager may sell a particular strategy within that three year time horizon.
Q. Who are the fund managers?
A. The GARS fund is managed by the multi asset investment team at Standard Life Investments in Edinburgh. Standard Life Investments manage over €160 billion of total funds of which over €2 billion is now managed in absolute return strategies. The multi asset team is made up of 21 of our most experienced fund managers who have on average 17 years investment experience.
Q. Is this a guaranteed fund?
A. No. There is no capital protection whatsoever.
Q. Is this a cautious managed fund?
A. No. Although it has similar volatility rating to a cautious managed fund but it will invest in a broader range of assets. Also the benchmark of GARS is to achieve cash plus 5% gross of fees over a rolling 3 year period.
Q. What type of investor does this fund suit?
  • Investors who want to invest in a fund that aims to provide positive investment returns in a variety of market conditions over the medium term.
  • Investors looking for a fund to form the core element of a portfolio or diversify an existing portfolio.
  • Investors who can invest for 6 years or more.
Q. What type of investor is this fund not suitable for?
A. Investors who do not wish to take any risk with their capital or invest in a fund that makes significant use of financial derivatives.
Q. What are the key benefits of investing in this fund?
A. The following are the key benefits of investing in GARS:
  • Aims to produce positive returns in all market conditions over the medium term
  • Lower volatility rating than the Standard Life Managed Fund
  • A transparent and liquid fund
  • Access to a range of different assets and strategies
Q. What is the minimum investment to access this fund?
A. Just €10,000.
Q. What is the annual management charge?
A. The annual management charge is 1.35%
Glossary
Maximum drawdown – The maximum drawdown of a fund is the maximum loss a fund would have experienced over a specific time. So this is a measure of the fund performance from its highest point to its lowest point (peak to trough).

Volatility rating – this gives a guide to the risk and return characteristics of a fund. Funds with more stable fund prices show less volatility and funds with less stable fund prices show higher volatility. Funds are rated by considering how investments in similar classes vary from month to month. Typically the higher the volatility the greater the potential returns, but also the greater the potential for loses. Standard Life’s funds are rated on a scale of 1 to 7, where 1 is more stable and 7 is less stable.

Long position –One that will benefit from the value of the underlying assets going up.

Short position – One that will benefit from the value of the underlying assets going down.

Opportunistic – we take positions on specific market opportunities that aim to deliver positive returns on a three year view.

Relative value – is an opportunity where we have identified an index or asset which appears to offer good value relative to another compared to their historical relationship.

Stock selection –Added value to the fund through active fund management from Standard Life Investments’ investment team. A technique commonly referred to as Portable Alpha, which enables us to isolate stock selection as a stand-alone strategy.

Duration – A measure of the sensitivity of the price of a bond to a change in interest rates, expressed as a number of years e.g. a portfolio’s duration is 7.5 years. Duration strategies enable us to make specific choices about the areas of risk we expect to be rewarded when investing in bond markets and can be implemented by using Interest Rate Swaps, for example.

Futures – Agreement to buy a commodity or financial asset on a date in the future at a fixed price.

Options – Gives the holder the right to buy/sell an underlying asset by a certain date at a fixed price.