A smooth ride with Standard Life GARS

What it does offer is a warm blanket for cautious investors who have been left out in the cold after fleeing the new world of volatile equity markets, created by the credit crisis five years ago. The fund has lower volatility than even the most guarded equity funds, but offers a rockier ride than long-dated government bonds.

GARS is a multi-strategy absolute-return fund that seeks to generate a positive return of 5 per cent above cash over the medium term, irrespective of market conditions. At the core of its success is the sheer scale of the brainpower devising its many strategies.

There is no 'star of the show' in this fund. With a team of 23 investment professionals deploying 30 different strategies at any one time, it is unusually managed, but if anyone thought 'too many cooks' might 'spoil the broth', they would be forced to eat their words.

The fund has consistently thumped its benchmark index (IMA Absolute Return) since mid-2009, is firmly a top-quartile performer over three years and was awarded a five-star rating from Bestinvest in its 2013 top funds guide. It contains a whopping £14.4bn in assets, a size normally considered unwieldy. But when you consider the scope of the individual strategies, covering a plethora of asset classes from currency hedging to Korean equities to volatility trading, the diversity of the operation makes more sense.

The current investment policy of the fund is to invest in permitted derivative contracts (including futures, options, swaps, forward currency contracts and other derivatives), transferable and fixed-interest securities, cash and other collective investment schemes. Use may also be made of borrowing, efficient portfolio management (including hedging) and stock lending.

No one strategy dominates, with the largest exposure for any one strategy around 7 per cent of the fund, further reducing individual manager risk. The fund grew by 45 per cent last year and Standard Life Investments claims it can double the assets under management in the strategy before liquidity would pose a problem.

But Rowan Garrow, investment director at Standard Life Investments, said the pressure of consistently coming up with high-quality ideas is one of the biggest threats the fund faces. "We meet every quarter to discuss new investment strategies. We typically deploy around a third to half of the ideas we come up with over a period of two to three years, but the procedure is very rigorous."

But the average industry experience of the professionals behind these strategies is 15 years, showing that, provided they continue to deliver quality strategies, your money won't just be in one pair of safe hands in this fund, it'll be in lots of them.

GARS has already won approval from ultra-cautious institutional investors, with 527 of the UK's major workplace pension funds invested at the end of 2012. And advisers are keen on it too, including Jason Hollands, managing director of business development at Bestinvest, who describes it as a "rare opportunity" for cautious investors and believes it is the best fund of its kind available on the market.

In September 2012, GARS lost three senior members of its team to Invesco Perpetual. While this was bad news, it was not disastrous, as GARs continues to be led by Euan Munro, the architect of the fund, and Guy Stern, who both have considerable experience.

One downside for investors is that you can't find out exactly what the fund managers are doing with your investments. A fund that is heavily based on derivatives means the returns depend primarily on the manager's stockpicking skills, not solely on the price of their holdings rising, so there is no list of the current top 10 holdings as there would be with conventional long-only funds. You can, however, see a list of the strategies that the manager is taking on the fund's fact sheet (see table below). On the upside, these are strategies that most investors would not be able to employ themselves.

The fund is eligible for individual savings account investors.

With an annual management charge of 1.5 per cent, this might not be the cheapest fund you've ever bought, but you'd be hard pushed to buy more investment brainpower for your buck elsewhere. If you're a cautious investor, the consensus is clear. This is the ultimate volatility-reducing performer. Buy.

Standard Life Global Absolute Return Strategy Retail Acc (ISIN: GB00B28S0093)

Portfolio risk and return analysis

Source: Standard Life GARS as at 31 December 2012