Absolute return fixed income strategies have a goal of a positive return in all market environments. It may be a real return over cash or a nominal return. Since the downgrade of US debt by Standard & Poor's, all markets have suffered as investors are rushing to the safest investments such as gold and, ironically enough, US Treasuries. There is a general de-risking across the board.
Absolute return funds do not have to be hedge funds. They may be separately managed accounts. Investors buy into this strategy to manage interest rate risk, increase diversification and enhance their returns. There are many ways an absolute return fund may be run. The manager's positions must be liquid. The fund must follow a disciplined investment process across all its exposures (alphas). The manager must be experienced in shorting assets.
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