Presentation of total return funds

Total return asset management became very popular in the years following the 2008 crisis. The essence of the approach is that such funds do not have to deliver competitive returns over the recommended investment horizon with a predefined benchmark index or a given asset class, but should aim to achieve positive returns in the prevailing market environment, i.e. to outperform risk-free returns.

To achieve this, portfolio managers have much greater freedom and the ability to rebalance the fund’s assets between different asset classes. In other words, funds are free to move their assets between higher-risk equity and commodity markets and lower-risk bond and money markets, depending on the fund manager’s market expectations.

In addition to this, OTP Fund Management Ltd.’s total return funds can also invest in derivative instruments, i.e. in addition to traditional long positions, the funds can also take short positions, i.e. they can profit not only from price rises but also from price falls. Within the limits of the law, they can also use leverage, so they can take positions higher than the value of their own assets.

Investing in derivative funds managed with a total return strategy can also involve significant risk due to the use of derivative instruments and positions in risky asset classes. Fund prices can fluctuate significantly in the short term, meaning that sharp falls in prices can occur. It is therefore important to stick to the recommended minimum investment horizon to reduce the impact of temporary fluctuations in exchange rates over the longer term.

Features of total return funds

• are not linked to a reference index
• seek total return
• use a wide range of investment instruments
• may involve significant risk