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A Go-Anywhere Fund That Can Handle Any Market

A Go-Anywhere Fund That Can Handle Any Market

Suzanne Hutchins.


Photograph by Kate Peters

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For many investors, not losing money is just as important as making more. The

BNY Mellon Global Real Return

fund excels at both.

The fund (ticker: DRRIX), managed by London-based Suzanne Hutchins, 53, aims to generate positive long-term, or “absolute,” returns, regardless of how the market has performed. “The objective…is to generate an absolute return of Libor or cash plus 4% over the longer term, and to help preserve capital on the downside,” she explains.

Libor, the London interbank offered rate, has been near zero since the 2008 crash, except for a small spike in 2018 and 2019—which means the $3 billion fund’s 4.2% annualized return in the past decade is close to its goal. It also beats 94% of its peers, many of which also seek absolute returns, in

Morningstar’s

Multialternative fund category. Throw in a 0.91% expense ratio—low for its hedge-fund-like category—and its appeal is apparent.

The U.S. version of the fund launched in 2010 after the 2008-09 bear market ended, though the British version of the strategy—largely identical except for its U.K. currency exposure—dates back to 2004. That strategy produced an impressive 4.8% return in 2008 when the MSCI All Country World Index of stocks fell 42% and the

S&P 500

index dived 37%. The U.S. fund has only had one down calendar year, a minuscule 0.01% decline in 2011.

One advantage of Hutchins’ strategy is its flexibility. The fund can invest worldwide in stocks, bonds, commodities, and precious metals without weighting constraints. It can also hedge, typically buying put options—financial contracts that give holders the right to sell securities at a predetermined price—in indexes such as the S&P 500 or the Euro Stoxx 50 to limit the downside. “We live in an ever-evolving investment environment, and you

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Why This Stock Market Melt-Up Is So Hard to Handle

Why This Stock Market Melt-Up Is So Hard to Handle

The stock market continued to ascend on Monday, with seemingly no obstacles in sight to keep major market benchmarks from challenging new record highs soon. Hope for help from Washington beat down any worries about the coronavirus pandemic, and high-flying tech stocks led the Nasdaq Composite to another huge gain. Rises for the Dow Jones Industrial Average (DJINDICES: ^DJI) and S&P 500 (SNPINDEX: ^GSPC) were a bit more muted but still added to their recent rallies.

Today’s stock market

Index

Percentage Change

Point Change

Dow

0.88%

251

S&P 500

1.64%

57

Nasdaq Composite

2.56%

296

Data source: Yahoo! Finance.

When the stock market crashes, it’s easy to understand why so many investors get uncomfortable. Yet in many ways, when the market climbs precipitously — as we’ve seen over the past several days — it can be even harder for investors to handle. That might not seem to make sense, and it wouldn’t if everyone followed one simple principle. But market melt-ups reveal the shortcomings of one of the biggest mistakes that many investors make.

Tons of market volatility

We’ve seen huge ups and huge downs throughout 2020, and even though there hasn’t been a market crash the size of what we saw in February and March, it’s still been staggering to see the pace at which market sentiment can turn. Throughout much of the summer, markets gained ground, with many indexes punching through old highs at the beginning of September.

^DJI Chart

^DJI data by YCharts.

That was followed by an abrupt downturn that took most of September. Yet after that correction, markets have moved higher quickly and furiously, with major benchmarks seeing gains of as much as 12% from their lows just a couple of weeks ago. Volatile stocks such as Tesla (NASDAQ: TSLA) have seen even more dramatic moves in

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