On Absolute Return, Market Neutral
and Long-Short Funds
The following is in response to a market commentary, What is conservative about Absolute Return, Market Neutral or Long/Short Mutual Funds?, by Kendall Anderson of Anderson Griggs, which appeared on May 23, 2011.
I enjoy the broad and generally informed commentaries available through Advisor Perspectives. However, I recently read Mr. Anderson’s commentary. There is certainly a nuanced dialogue that could occur concerning these types of strategies, including the risks and long-term returns, but this article does not take part in that dialogue, relying on generalization and the negative connotation of fear buzzwords like “derivatives” and “credit default swaps” (without explaining why they are risky) as his primary arguments against the funds. He finishes the article with exactly the type of bad advice that turbulent financial times promote: just leave your money in the bank.
Wright-Patterson Air Force Base
Kendall Anderson responds:
I’d like to thank you for your letter concerning our recent commentary. I know that there are others who have similar thoughts to your own. While I am in a thankful mood, I have to give you round of applause for you and your co-workers at the great US Air Force research laboratory. Some people have, in jest, called us Chartered Financial Analysts “rocket scientists.” If they took a few minutes to observe the work you do, they would quickly see that we are just a group of number crunchers.
Although not reproduced at Advisor Perspectives, our firm’s logo includes the tag line “Common Sense Investment Management for Intelligent Investors.” There is a reason we keep this up front on all of our commentaries – which I will explain – but first I want to give you our definition of “common sense.” We define it as looking at things the way they really are, not the way we hope they will be.
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