Absolute return strategy - Financial definition
Concise definition of the term absolute return strategy
An absolute return strategy in finance aims to generate positive returns regardless of market conditions, focusing on achieving gains independent of traditional market benchmarks.
Comprehensive definition of the term absolute return strategy
An absolute return strategy is designed to consistently produce positive returns by employing various investment techniques, such as long/short positions, derivatives, arbitrage, and other hedging methods. Unlike relative return strategies, which seek to outperform a specific benchmark or index, absolute return strategies prioritize achieving a target return or protecting against losses, irrespective of broader market movements.
For instance, hedge funds often use absolute return strategies to deliver steady gains through diverse market conditions. These strategies are commonly used by investors seeking portfolio diversification and risk mitigation, providing a potential buffer against volatility and downturns in traditional markets.