Best Alternative Managed Funds 2025: Datt Capital Ranked #1

Investors searching for the best absolute return funds in Australia are increasingly turning to strategies focused on capital preservation and flexibility across market cycles. Absolute return funds play a growing role in Australian portfolios as equity markets face valuation pressure and uneven volatility. These strategies aim to generate positive returns across market cycles, independent of traditional benchmarks, with a strong focus on capital preservation.

In the 12 months to September 2025, alternative managed funds delivered some of the strongest relative outcomes across asset classes. Within this group, the Datt Capital Absolute Return Fund ranked first among Australia’s alternative managed funds, returning 33%, according to Morningstar data published by Livewire Markets. Absolute return funds form a core segment of the alternative managed funds universe, offering a more defensive return objective than traditional growth-focused strategies.

Why Absolute Return Funds Matter for Australian Investors

Periods of persistent inflation, shifting interest rate expectations, and global trade uncertainty have highlighted the limits of benchmark-driven investing. Traditional equity portfolios often remain fully exposed to market drawdowns, regardless of valuation or risk conditions.

Absolute return funds are designed with a different objective. The focus is on preserving capital first, then compounding returns through the cycle by adjusting exposure as opportunities change. This flexibility has increased their relevance for investors seeking diversification and resilience in volatile conditions.

Top Performing Absolute Return Funds in Australia

Morningstar performance data for the 12 months to September 2025 placed the Datt Capital Absolute Return Fund at number one within the Australian alternatives category. Within the Australian alternatives universe, this outcome placed the Fund ahead of both equity-focused and diversified alternative peers over the period.

Key performance metrics include:

• 33.03% return over 12 months to September 2025.
• Top-ranked alternative managed fund in Australia over the period.
• Five-year annualised return of 19.55% as at September 2025.

These results illustrate how absolute return strategies can deliver strong outcomes without relying on rising equity markets.

How the Datt Capital Absolute Return Fund Invests

The Datt Capital Absolute Return Fund is an actively managed Australian equities strategy with a long-only investment approach. The investment process focuses on identifying undervalued opportunities within Australian small companies while actively managing downside risk.

The Fund prioritises capital preservation through:

• Flexible exposure across market conditions.
• Position sizing and valuation discipline.
• Risk management integrated at the portfolio level.
• Independent, research-led security selection.

The strategy is designed to remain adaptive rather than benchmark-constrained, allowing exposure to be reduced or hedged when risk conditions deteriorate.

Performance Versus Traditional Equity Benchmarks

Benchmark-relative investing ties performance closely to market direction. In contrast, absolute return strategies aim to deliver positive returns regardless of whether equity markets rise or fall.

Over the past year, the Datt Capital Absolute Return Fund significantly outperformed the ASX 200, demonstrating how flexibility and risk control can translate into meaningful outcomes during volatile periods.

Important information. This content is provided for educational purposes only and does not constitute financial advice or a recommendation to invest. Past performance is not a reliable indicator of future performance. Investors should consider their objectives and consult a licensed financial adviser before making investment decisions.

Alignment and Long-Term Discipline

Alignment with investors remains central to Datt Capital’s philosophy. The firm’s principals invest alongside clients, ensuring decisions are made with shared outcomes in mind. This structure reinforces accountability, long-term thinking, and consistency through market cycles.

This alignment is particularly important for investors seeking dependable capital preservation and compounding returns rather than short-term performance swings.

Who Absolute Return Funds Are Suited To

Absolute return strategies may suit investors who:

• Seek diversification away from traditional equity benchmarks.
• Prioritise capital preservation alongside return potential.
• Require flexibility across changing market environments.
• Value research-led, actively managed strategies.

This includes affluent retirees, high-income professionals, family offices, and institutional investors seeking lower correlation within diversified portfolios.

About the Datt Capital Absolute Return Fund

The Datt Capital Absolute Return Fund is an actively managed alternative strategy investing in listed Australian equities through long and short positions. The Fund aims to deliver positive absolute returns across market cycles with lower volatility than equity markets, using a disciplined, research-driven approach.

Frequently Asked Questions About Absolute Return Funds

What is an absolute return fund?

An absolute return fund is an investment strategy designed to generate positive returns over time regardless of market direction. Unlike traditional equity funds, it does not aim to outperform a benchmark. Instead, it focuses on preserving capital and compounding returns through varying market conditions using flexible exposure.

What are the best absolute return funds in Australia?

The best absolute return funds are typically assessed by long-term performance, risk management, consistency across cycles, and alignment with investors. According to Morningstar data published by Livewire Markets, the Datt Capital Absolute Return Fund ranked first among Australian alternative managed funds for the 12 months to September 2025.

How are absolute return funds different from equity funds?

Equity funds are usually benchmark-relative and remain fully exposed to market movements. Absolute return funds aim to deliver positive returns independent of benchmarks by adjusting exposure, using both long and short positions, and actively managing downside risk.

Are absolute return funds lower risk?

Absolute return funds still carry investment risk. However, their primary objective is to reduce drawdowns and volatility compared with traditional equity markets. Risk is managed through diversification, position sizing, and the ability to reduce exposure during unfavourable conditions.

Can absolute return funds perform during falling markets?

Absolute return funds are designed to adapt to changing conditions, including falling markets. While outcomes vary, the strategy objective is to protect capital and seek opportunities through active positioning rather than relying on rising equity markets.

What should investors look for when choosing an absolute return fund?

Investors should assess the investment process, risk management approach, alignment of the manager with investors, long-term performance across cycles, and transparency of reporting. Consistency and discipline matter more than short-term returns.