Absolute Return is a term used to describe the performance of an investment or portfolio relative to its starting value. It is measured through the calculation of returns over time, and can be expressed as either a percentage or absolute number. Absolute return strategies seek to generate positive returns regardless of market conditions, with minimal volatility and risk.
The goal of absolute return investing is typically not to beat a benchmark index, but rather to achieve consistent gains regardless of market direction. This strategy generally involves diversifying investments across different asset classes such as stocks, bonds, commodities and currencies in order to reduce overall exposure to systemic risk while still participating in upside potential when markets are trending upward. Additionally, many investors will employ hedging techniques such as short selling securities in order to protect against downside losses if markets turn southward unexpectedly.
Overall, the objective for any absolute return strategy should be capital preservation first followed by capital appreciation from price increases and income from dividends or interest payments on assets held within the portfolio. As with any investment strategy there are pros and cons that must be weighed before adopting an absolute return approach; however it remains one of the most popular options among institutional investors due its ability to generate steady returns throughout all types of economic environments without requiring large amounts of money up front or ongoing management costs like other more traditional methods require .
