Absolute-return mutual funds are making a comeback. I say "comeback" in the sense that more and more mutual fund companies are rolling out the product.
Why are companies like Putman, Legg Mason and Invesco introducing absolute-return mutual funds in their lineups? The skeptic in me believes the fund companies are promoting the products because, by definition, absolute return means a fund can provide positive returns regardless of the market's condition. Keep in mind, absolute return means a fund "can" not "will" provide postive returns. So, what sells better in a down market? You can always look at what the fund companies are promoting. Obviously, the thought is that absolute-return funds will be a hot product.
The typical mutual fund focuses on relative returns (returns relative to a benchmark such as the S&P 500) versus absolute returns (returns that are not compared to a benchmark).
Still not clear? Daniel Wiener, editor of Independent Adviser for Vanguard Investors and CEO of Adviser Investments, summed it up nicely in a piece on Forbes.com. He said, "It's fine and well to talk about benchmarking versus absolute returns versus goals, but the fact is that investors/clients aren't consistent. When the market is going down they want absolute returns. When it's going up, you'd better be beating the market."
Read more about aboslute-return funds at About.com: