What are real returns?

We consider real returns to be the returns investors achieve after subtracting inflation from the nominal return. Inflation reduces returns; it erodes investor's capital. We explicitly build and manage our strategies with the aim of maximizing real returns. Doing so preserves investor's capital in the long term.

Measuring returns against the right benchmark

At Blue Diamond we consider real to be the excess return over localized inflation. Localized inflation is expressed in terms of the appropriate inflation measure and currency. Our target return for a Swiss investor is Landesindex der Konsumentenpreise (LIK) plus 5%.

Minimize the impact of currency fluctuations

The Blue Diamond Real Return Strategy sees currency fluctuations as a risk. Blue Diamond runs a global portfolio with assets denominated in different currencies. When you buy a foreign asset, you are always making two investment decisions: on the performance of the asset and the performance of the currency. The currency rate can substantially improve or detract from the total return of the asset. Blue Diamond Asset Management attempts to minimise the impact of currency fluctuations on the portfolio by hedging currency.

Real is not equal to capital-protected

BDRRS's objective is to maximize real returns while limiting drawdowns, and is therefore not a capital-protected strategy. Capital-protected strategies cannot always fully protect capital as they are exposed to real counterparty risk. Blue Diamond effectively minimizes counterparty risk by using exchange-traded instruments. Blue Diamond offers no explicit capital protection or performance guarantee.

Real is not equal to inflation-protected

BDRRS’s objective is to maximize real returns while limiting the loss of purchasing power due to inflation, and is therefore not an inflation-protected strategy.