Business Week – It’s a sign of the times that even after a 65% runup in the Standard & Poor’s 500-stock index over the past nine months, investors still feel nervous about what 2010 may have in store for them. The official end of the recession in the third quarter has all but quelled speculation about a double-dip economic downturn. Still, plenty of doubts remain as to how the economy will respond to the withdrawal of the government’s massive fiscal stimulus and the open-ended questions around unemployment and mortgage foreclosures rates.
The sting from the wide-scale wealth destruction of last year and early 2009 was enough to scare all but the most risk-averse investors into the arms of money managers whose primary goal is to reduce volatility and downside risk in their clients’ portfolios. That’s the bedrock of the absolute return approach. Think of it as the market equivalent of the medical profession’s credo “First do no harm,” which in this case applies to a client’s principal.
