So, What is an Absolute Return Fund?

Absolute Return is similar to market neutral in the sense that they are both investment strategies undertaken that seeks to profit from both increasing and decreasing prices in a single markets. Absolute Return strategies can be achieved by taking long and short positions in different stocks to increase the return from making good stock picks and decreasing the return from broad market movements.

There are a few ETFs that utilize this methodology, and reading their investment prospectuses may give you a bit more insight into how they achieve their goals. Rydex, and others even offer mutual funds that utilize this strategy. ETFs and mutual funds are a much safer, and easier way, to gain access to this investment strategy than trying to get into a hedge fund.

Many investors feel commodity investments are a type of Absolute Return approach. But as we have all seen in 2008, that is certainly not the case. Though any investment can be used to achieve absolute return if it is done so in the proper context.