Absolute Return Strategies Fuel Gains for Merifund Capital

As of 28 July 2024, absolute return strategies are delivering sustained performance for Merifund Capital Management Pte. Ltd., generating a 12‑month return of 10.3% to 30 June 2024, outpacing the primary benchmark’s 8.3%. This outcome highlights the role of structured, research‑driven portfolio management in building resilient wealth while controlling volatility in a shifting market environment.

Shifting Market Dynamics

Absolute return investing aims to achieve positive outcomes across all market conditions, defining success in absolute rather than relative terms. Over the preceding year, government bonds recorded volatility of 4.65% and global investment‑grade credit 4.49%, while absolute return bond strategies sustained just 1.59%. Such low volatility, combined with flexibility across asset classes, continues to attract investors seeking financial stability.

By avoiding benchmark constraints, these strategies allow managers to employ tools such as arbitrage, derivatives, and risk hedging to deliver consistent returns. Their low correlation with traditional assets supports portfolio diversification, particularly valuable amid ongoing uncertainty in 2024.

Strategic Allocation Insights

Distinct from Traditional Long‑Only Management

While traditional long‑only asset and portfolio management relies heavily on market benchmarks, absolute return strategies preserve agility, enabling activity across sectors, geographies, and instruments to capture timely opportunities.

Integrating ESG Investment Factors

The model complements sustainable asset management by incorporating ESG investment principles alongside return objectives. This alignment supports sustainable wealth strategies while maintaining adaptability to market developments.

Portfolio Structure and Techniques

Multi‑Strategy Framework

Merifund employs four integrated pillars:

• Macro: Capturing opportunities from macroeconomic shifts and policy cycles.
• Quantitative: Analysing over 7,000 companies daily using fundamental and sentiment indicators.
• Credit: Leveraging fixed‑income derivatives and credit default swaps to identify mispriced debt.
• Equity: Maintaining market‑neutral positions that balance long and short exposures.

Use of Derivatives and Alternatives

Futures, options, and swaps are applied under strict controls to manage risk and enhance returns. Allocations to structured products and selected private market assets add diversification without compromising liquidity.

Performance and Risk Management

In June 2024, Merifund’s strategies delivered a +2.10% net return, bringing the 12‑month rolling return to +9.10%. Strategic positions in US Treasuries and UK Gilts, along with timely shifts in duration exposure, were key drivers. The firm applies a volatility management framework that combines targeting, capping, and variable capping techniques, which helped maintain stability at 1.59%.

Elevated cash holdings have provided defensive protection while enabling swift capital deployment into market dislocations.

Future Outlook

Volatility remains the prevailing condition in 2024. Merifund’s forward allocation prioritises uncorrelated opportunities, with particular emphasis on regions exhibiting independent economic drivers. Close monitoring of fiscal policy shifts and central bank actions will continue to shape positioning.

Advanced analytics and disciplined ESG integration remain central to sustaining resilience. For institutional and sophisticated investors, absolute return strategies offer precise portfolio tools to preserve capital and pursue long‑term growth in a changing global market.