Absolute return is a financial term that refers to the total return of an investment or a portfolio over a specified period, without comparing it to any benchmark or index. It measures the actual gain or loss in the value of an investment, regardless of market conditions. Absolute return is often expressed as a percentage.

Key points about absolute return include:

1. **Benchmark-Independent:** Unlike relative return, which compares the performance of an investment to a benchmark, absolute return does not rely on external benchmarks. It focuses solely on the actual monetary gain or loss over a given period.

2. **Goal of Capital Preservation:** Absolute return strategies often prioritize the goal of capital preservation. This means that the focus is on generating positive returns in various market conditions, including both bull and bear markets, rather than outperforming a specific market index.

3. **Risk Management:** Absolute return strategies typically involve active risk management to mitigate downside risk and protect capital. Fund managers using absolute return strategies may employ a variety of techniques, including dynamic asset allocation, hedging, and other risk mitigation strategies.

4. **Diverse Investment Approaches:** Absolute return strategies can encompass a wide range of investment approaches, including long and short positions, derivatives trading, and alternative investments. The goal is to generate positive returns irrespective of market direction.

5. **Use in Hedge Funds:** Absolute return strategies are often associated with hedge funds, which use a variety of investment strategies to generate positive returns regardless of market conditions. Hedge funds may employ leverage and derivatives to enhance returns or manage risk.

6. **Risk-Adjusted Performance:** While absolute return focuses on the total return without comparison to a benchmark, investors and fund managers may still assess the risk-adjusted performance of an investment. Measures such as the Sharpe ratio or the Sortino ratio help evaluate how much return is achieved per unit of risk taken.

7. **Investor Expectations:** Investors seeking capital preservation and positive returns in various market environments may be attracted to absolute return strategies. These strategies are often considered as part of a diversified investment portfolio.

It’s important to note that the success of absolute return strategies depends on the skill and expertise of fund managers in navigating different market conditions. Additionally, investors should carefully evaluate the risk characteristics and fee structures associated with absolute return funds or investment products.