Absolute return fund managers have had a difficult 12 months, according to the annual review of the sector by Standard & Poor's Fund Services. Few hit performance targets over Libor.

Few funds with at least one year's track record achieved performance targets over Libor said S&P Fund Services lead analyst Kate Hollis. This was partly because of inflated Libor caused by the financial crisis.

However, some did achieve their targets in 2008 while many other funds achieved positive returns.

Global tactical asset allocation (GTAA) funds rated by S&P Fund Services were the least successful, largely because most were long equities.

"Most funds have been positive in the first quarter of 2009, although still struggling to beat inflated Libor returns," reported Hollis.

Several UK equity long/short funds had been caught out by the rapid sector rotation in the market. GTAA funds also continued to have difficulties as many have longer-term positions and were not helped by the swings in risk appetite.

The absolute return sector continued to develop in the 12 months to 31 March 2009. An increasing number of new fund launches were clones or near-clones of longer-running hedge funds in Ucits III wrappers, a trend S&P Fund Services expects to see continuing in the coming months.