Standard Life GARS Fund

Marc, MorningStar are not showing all the relevant information on GARS. MorningStar seem to be showing the physical allocation of assets in the fund, which doesn't show the strategies in the fund after the derivative overlays. This is a true reflect of the strategies in the fund.
GARS does use pair trades or relative value strategies however these are at the macro level and are not just equity strategies, they could be for credit and government bonds and also volatility strategies. The fund also uses directional and market returns to aim to deliver low risk positive performance in all investment environments.
How GARS works is taking a 3 year investment outlook on its strategies. The fund managers believe that this captures return more consistently from demonstrable market inefficiencies and once an investor is patient then these opportunities can be exploited. Also make sure strategy selection is based on return, diversification and liquidity.
Of course there is room for low cost passive investment. However low cost does not mean strong returns.

I had not heard of GARS for a long time.

How have they done in Ireland?

The Financial Times had a scathing article about them.


Rory Gillen didn't like them back in 2010

'Absolute Return Funds are not the Holy Grail of Investing'

Marc was equally critical

I have looked at this fund in considerable detail and I conclude that it is the Emperor's new clothes. A good marketing campaign but with no real substance.

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Brendan

Elacs described them in 2019 as a Global No Return Fund

https://www.askaboutmoney.com/threads/ganrs-standard-life.212474/

More complaints here


And analysis here

Brendan Burgess said:

I had not heard of GARS for a long time.

How have they done in Ireland?

The Financial Times had a scathing article about them.

Downfall of once-mighty Gars fund offers investors lessons

Former Abrdn flagship closes after years of underperformance

www.ft.com

Rory Gillen didn't like them back in 2010

'Absolute Return Funds are not the Holy Grail of Investing'

Marc was equally critical



Brendan

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The fund is closing later this year, so that might give some indication of how it's done

GARS is closing because Standard Life has advised that they no longer have confidence that the can meet their performance objective. This has been obvious for quite some time and I also commented on SL's ineptitude in the past.

Imagine you put your ARF with GARS 10 years ago in the belief that you couldn't bear the volatility of equities and that a steady couple of % each year would be fine. Over those 10 years, you'd have paid very high management charges (Standard Life and perhaps an adviser) and would have received a net return of, on average, a negative couple of % p.a. instead of a positive couple of % p.a.

In other words, the retiree delivered on his side of the deal (paying his fees) but SL spectacularly failed to deliver on their service promise. It's clearly not "fair" that SL retains all the charges in this scenario - but could/should/can the Ombudsman help such a pensioner?

In summary, can charges be recouped when a service has not been delivered to such an extent over an extended period? Remember, up to recently, over the last two years, it looks like SL were just having a final roll of the dice - losing circa 10% a year in a Cash Plus fund?

jasdpace@gmail. said:

SL spectacularly failed to deliver on their service promise.

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I doubt that SL promised any particular performance.

You pick a fund or a fund manager and you might be lucky or unlucky.

The GARS experience underlines how predictive of bad performance high charges are.

Brendan

jasdpace@gmail. said:

It's clearly not "fair" that SL retains all the charges in this scenario - but could/should/can the Ombudsman help such a pensioner?

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I doubt it. Short of actual misselling, of which there is no evidence in this case as far as I know, surely it's a case of caveat emptor and punters informing themselves before choosing an investment, as @Rory Gillen said here way back when...

The issue is not with Standard Life per se. It’s with the brokers who missold GARS as a land of milk and honey to unsuspecting clients. Most if not all of those brokers had little or no idea what exactly GARS was or how a hedge fund works. But it paid up to 5% upfront commission and ongoing fee income for the brokers, so it ticked the box for them. If a broker had advised me to put most or all of my money into a hedge fund like GARS with the soft promise of 5% return in any type of market, I’m not sure I’d be heading to the Ombudsman. I think I’d be heading to Arthur Cox and then to the Courts.

Most of the brokers who post here are good people. But sadly they’re a minority in that industry. My sense is that the bulk of the broker community were flogging this like snake oil to unsuspecting clients who were like lambs to the slaughter.

I posted a very detailed analysis of why I didn’t like it ex ante and also subsequent updates of how it was performing ex-post relative to a simple index 40/60 portfolio.

A summary of my points

As I said at the time it was a closet index 40/60 portfolio with a side bet at paddy power.

All of the miracle returns could be a attributed to a lucky 2 week period during the financial crisis.

The full analysis can be found here


Seriously question any broker who put you into this fund

Gordon Gekko said:

The issue is not with Standard Life per se. It’s with the brokers who missold GARS as a land of milk and honey to unsuspecting clients. Most if not all of those brokers had little or no idea what exactly GARS was or how a hedge fund works. But it paid up to 5% upfront commission and ongoing fee income for the brokers, so it ticked the box for them. If a broker had advised me to put most or all of my money into a hedge fund like GARS with the soft promise of 5% return in any type of market, I’m not sure I’d be heading to the Ombudsman. I think I’d be heading to Arthur Cox and then to the Courts.

Most of the brokers who post here are good people. But sadly they’re a minority in that industry. My sense is that the bulk of the broker community were flogging this like snake oil to unsuspecting clients who were like lambs to the slaughter.

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GARS was just a fund in the suite of funds offered by Standard Life. If a broker was charging 5% commission, he would have received it for the product and not the fund. He would have got 5% if he put the money into US equities too.

GARS got off the a spectacular start rising out of the ashes of the financial crises. This was a time when advisors were being lambasted for having clients in Balanced funds that had 60% - 75% equities and which lost -30% of their value. It was a new approach and it worked (rising tide lifts all boats) for a while. It was an incredibly complicated fund though (a day long course to explain how it worked) and expensive. It didn't take long to start underperforming and never recovered.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

The point though, Steven, is that if the world’s greatest ever fund appeared but it didn’t have the potential to pay the readies for the bad broker, none of their clients would hear about it.

I suspect that this recently Thematic Review on the Ongoing Suitability of Long-Term Life Assurance Products had its part to play. They mainly refer to Cash Funds (there has to be other funds the CB found ) because it doesn't identify an 'offender' but I suspect that SLAC might have a lot of 'orpahaned' policyholders too.

The company has struggled to find a niche and (looking at the industry FactFiles for 2010 - 2020) their market share has decreased from 6.8% to 4.7% in 10 years.

We tend to forget that there is a chain of gain on new product/fund introductions. The distribution channel is just one link. The idea is born and developed, the actuaries and accountants sign off on it, the sales managers and distribution channel consultants sell it to the person between them and the buyer. There's a financial gain for everyone in that chain if the product/fund is sold. Targets/Rewards galore.

I honesty don't know what direction SLAC management are trying to bring it in. There appears to be no attempt at organic growth at all. Can't sell GARS. Can't sell With Profit. What will we do?

It's like they just want to try and take existing business from the competitors by tweaking pricing/commissions (big advocate of the 'consolidation' of plans lark) because they've nothing else to offer.


Gerard

www.bond.ie

GARS was a dream come through for the many bad eggs who reside in the broker world. It paid 5% upfront and ongoing income. It was complex, which meant smoke and mirrors to blind the client. And it did well initially. But the poor clients were like lambs to the slaughter.

Just curious why the broker is getting all the flak. SL designed, marketed and managed the product and didn't come anywhere close to its performance objectives for circa a decade.

Gordon Gekko said:

The point though, Steven, is that if the world’s greatest ever fund appeared but it didn’t have the potential to pay the readies for the bad broker, none of their clients would hear about it.

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There's always a fund of the month. Look at Prisma with Zurich Life or MAPS with Irish Life. They all pay the same level of commission too. Do a risk profiling questionnaire with either of these life companies and I guarantee you they will recommend one of these funds. The marketing story wasn't as good as GARS though. Timing had a big part to play.

GSheehy said:

I honesty don't know what direction SLAC management are trying to bring it in. There appears to be no attempt at organic growth at all. Can't sell GARS. Can't sell With Profit. What will we do?

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ARFs were their biggest market. PRSAs have overtaken that so far this year. They don't have a master trust and have gone down the PRSA route They famously got rid of their personal pension offering years ago in favour of PRSAs and had to row back. This time the PRSA is replacing the exec pension. With their new pricing structure coming out next week and their Vanguard funds, they have a strong offering. I use them a lot based on price and passive fund offering.

Steven Barrett said:

ARFs were their biggest market. PRSAs have overtaken that so far this year.

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They wrote less SP pension business in 2019 than they did in 2009 (a market share drop of 14% to 6.7% over that period).

Every PRSA provider has had a spike in PRSA business this year. I'm pretty sure I heard one of the providers say at a presentation that their average premium had increased from €20K pa in 2022 to €80K pa in 2023.

The SLAC (special offer) commission was woefully generous. I was trying to figure out their break even on their RP PRSA (the one that paid 20% commission) and my best guess was that they'd not break even until year 8/9, but clawback was only over 5 years.

Will be interesting to see if their offering next week continues on those terms.


PS: For anyone that's reading this that's actually in the GARS Fund, the fund you're going to be switched into on closure on 31/10/2023 has a TER of 0.47% pa less than the GARS Fund.

Gordon Gekko said:

GARS was a dream come through for the many bad eggs who reside in the broker world. It paid 5% upfront and ongoing income. It was complex, which meant smoke and mirrors to blind the client. And it did well initially. But the poor clients were like lambs to the slaughter.

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Can we just clear something up here? Funds don't pay brokers commission; products do. Every product has a choice of funds and a choice of commission options. So a broker had the same choice to get paid 5% commission on a Standard Life product, Irish Life product, Zurich Life product etc.

GARS didn't pay 5% commission or ongoing income. Standard Life had products available that paid 5% commission and ongoing income. They also had products that paid less commission. So did every other life company. Still do.

A bad broker always had the products available that could pay 5% initial commission plus ongoing trail. GARS was just a new fund choice and didn't offer the broker a cent more or less than was already available.

I'm not defending GARS in this post. It was a complex hedge fund and it performed poorly. I'm just saying that GARS wasn't sold because it paid brokers more commission than any other fund choice. It didn't.

LDFerguson said:

Can we just clear something up here? Funds don't pay brokers commission; products do. Every product has a choice of funds and a choice of commission options. So a broker had the same choice to get paid 5% commission on a Standard Life product, Irish Life product, Zurich Life product etc.

GARS didn't pay 5% commission or ongoing income. Standard Life had products available that paid 5% commission and ongoing income. They also had products that paid less commission. So did every other life company. Still do.

A bad broker always had the products available that could pay 5% initial commission plus ongoing trail. GARS was just a new fund choice and didn't offer the broker a cent more or less than was already available.

I'm not defending GARS in this post. It was a complex hedge fund and it performed poorly. I'm just saying that GARS wasn't sold because it paid brokers more commission than any other fund choice. It didn't.

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That nuance isn’t really relevant though, because GARS gave the bad brokers smoke and mirrors and was not understood by those same bad brokers. The same can’t be said for an equity fund.

Marc said:

Seriously question any broker who put you into this fund

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I didn't bother doing that, as I'm sure that the self-righteous waffle would have bored me to tears.

Instead, I just stopped using him.

And moved on to another, equally charming, adviser who persuaded me to invest in Dolphin Trust.

And subsequently in Solar 21.

After which I threw my hat at QFAs and decided that henceforth I'd do the bad picking all by myself.