Absolute Return: The 2025 Guide for Smarter Australian Investments

For decades, most Australians measured their investment success by how well they kept up with the market. But in 2025, there’s a new yardstick: absolute return. This approach prioritises consistent, positive returns regardless of whether the ASX surges or stumbles. With global uncertainty and the aftershocks of inflation still rippling through the economy, more investors and super funds are demanding strategies that focus on real-world outcomes, not just beating benchmarks.

What Is Absolute Return? Why It’s Gaining Ground in 2025

Absolute return is an investment approach that targets a specific, positive return over a defined period—no matter how broader markets perform. Unlike traditional relative return investing (which is about outperforming a benchmark like the ASX 200), absolute return funds aim to deliver steady gains, even in downturns.

• Example: If the ASX 200 drops 5% in a year, an absolute return fund that delivers +3% has outperformed both the benchmark and many traditional funds.
• 2025 Policy Update: The Australian Prudential Regulation Authority (APRA) now encourages super funds to report both absolute and relative returns, giving members a clearer picture of how their retirement savings are performing in all market conditions.

With market volatility heightened by geopolitical tensions and ongoing rate adjustments by the RBA, absolute return strategies are becoming especially attractive for risk-conscious investors.

How Absolute Return Strategies Work

Absolute return managers aren’t tethered to traditional asset allocations. Instead, they use a flexible toolkit:

• Long/short equity: Buying undervalued shares and short-selling overvalued ones.
• Global macro: Taking positions based on big-picture economic trends—think currencies, interest rates, or commodities.
• Multi-asset approaches: Combining equities, bonds, alternatives, and even derivatives to smooth out returns.

In Australia, several leading asset managers have launched absolute return funds tailored to local investors. For example, in 2025, Magellan’s Absolute Return Fund and Perpetual’s Diversified Real Return Fund both boast track records of positive annual performance—even during 2022–2023’s market turbulence.

Who Should Consider Absolute Return—and What Are the Risks?

Absolute return investing isn’t just for the ultra-wealthy or sophisticated institutions anymore. In 2025, retail investors can access these funds via managed accounts, superannuation options, and even some listed investment trusts (LITs).

Consider absolute return if you:

• Want to reduce the impact of market downturns on your portfolio
• Are nearing retirement and value capital preservation
• Prefer smoother, less volatile returns over chasing big gains

However, it’s not all upside:

• Some strategies rely on complex derivatives and can be harder to understand
• Fees are often higher than basic index funds (watch for performance fees in particular)
• Not all absolute return funds deliver as promised—always check multi-year performance and manager credentials

In 2025, ASIC has ramped up disclosure requirements for these products, so investors have better visibility into risk and return expectations.

2025 Outlook: Absolute Return in a Changing Economy

With the Reserve Bank of Australia signalling a ‘higher-for-longer’ rate environment and the global economic outlook still mixed, absolute return strategies are poised to play a bigger role in Australian portfolios. Super funds are increasingly blending these funds into their default options, and financial advisers are recommending them as a diversifier against traditional equity and bond risk.

As the focus shifts from chasing benchmarks to achieving personal financial goals—be it early retirement, funding a child’s education, or simply sleeping better at night—absolute return is likely to be more than a buzzword. It’s a new investment mindset for a new era.