Most major indices retreated sharply from the start of September to 16 October, while yields on core government bonds dropped as panicked investors rushed to safe havens.

Losses racked up across the board, with the FTSE 100 down 10 per cent from intra-day peak to trough. The MSCI Global index dropped off 9%, alongside declines in the US, Europe, and Asia.

The average fund in the UK All Companies sector also fell 10 per cent during the period, as investors were caught up in an indiscriminate sell-off.

Absolute return equity funds remain a mixed bag, with many having failed to achieve gains when markets have fallen in the past, but they do appear to have held up better this time around.

Indeed, a few have managed to sidestep the falls to delivering positive returns during the period. Below are the ten best long/short equity funds from the UK market peak on 4 September to the lows on 16 October.

1 Old Mutual Global Equity Absolute Return +1.52% (Three-year return: 22.3%)

The £1.2bn fund, run by Ian Heslop (pictured) and colleagues, has been managed by the same team since its launch in 2009. With 730 holdings, the fund’s risk is significantly spread. An overweight to sectors including healthcare, which makes up just under 10% of the portfolio, has undoubtedly helped recently, as investors sought refuge in defensives. The fund is also underweight sectors most affected by the recent correction, including consumer staples.

2 GLG Alpha Select Alternative +1.27%
(Three-year return: 13%)

Run by Charlie Long and Nick Judge, the £1.7bn GLG Alpha Select Alternative fund has a large-cap bias, and was shorting most of the sectors which suffered sharper falls during the sell-off, including financials, industrials, and materials.

3 Schroder GAIA QEP Global Absolute +0.95%
(Three-year return: 7.9%)

One of the smaller funds on the list, Schroders’ $12m GAIA fund was shorting stocks in both financials and industrials prior to the sell-off. Run by the group’s quant desk, the fund also held almost 20 per cent in cash heading into the correction, with net market exposure of just 21.5 per cent.

4 Schroder UK Absolute Target +0.94%
(Three-year return 12.6%)

Steve Cordell’s £374m fund enjoyed some success with its short book in September in particular, with a position in Tesco helping generate a positive return of 2.5 per cent on the short side. Indeed, the whole sector was a successful hunting ground for the fund’s short book. Cordell said net exposure at the end of September was 11 per cent short on a beta adjusted basis as the UK enters a “tricky period”.

5 Kames UK Equity Absolute Return +0.94%
(Three-year return 11.9%)

The £349m fund, managed by David Griffiths and David Pringle, saw returns buffered earlier in September by its large holding in Carphone Warehouse. The stock, which made up 1.5 per cent of the portfolio, benefited from the collapse of rival Phones 4U. A short position in mining also contributed to positive returns, thanks to falling commodity prices.

6 Thesis TM Cartesian UK Absolute Alpha +0.73%
(Three-year return 37.2%)

Launched in 2006 and managed by Andrew Kelly and Jeremy Hall, the fund is £21m in size. Heading into the sell-off, the portfolio held significant short positions in some of the most challenged sectors, with net exposure of -5 per cent in both the materials and consumer goods sectors.

7 BlackRock European Absolute Alpha +0.35%
(Three-year return 13.9%)

Vincent Devlin and Stefan Gries’ £67m fund benefited from short positions in a prominent UK supermarket and two offshore energy services companies during the early part of the sell-off. Long positions in large healthcare companies, including AstraZeneca, also helped bolster returns as the sector outperformed in September.
 
8 BNY Mellon Absolute Return Equity +0.11% (Three-year return 12.8%)

With £1.4bn of AUM, this is one of the largest funds on the list, and is managed by a team at Insight Investment. The fund has seen returns from defensive long positions, including Dutch technology firm ASML and Imperial Tobacco.
The team’s standout short has been Hargreaves Lansdown, which saw its share price slide 12 per cent in September.

9 Insight Absolute Insight Equity Market Neutral +0.09%
(Three-year return 12.6%)

The £929m fund’s market neutral approach paid off during the correction. Run by the group’s specialist equity team, its sector positions are also unconventional, with the fund long consumer discretionary, consumer staples and financials, and short technology at the margin.

10 Old Mutual UK Opportunities +0.07%
(Three-year return 26.7%)

The fund is the smaller of Simon Murphy’s two portfolios, with £31m in assets under management.  The fund was short several key sectors, including consumer services and goods at -8.1 per cent and -9.4 respectively, while running long positions in resources companies.

Data from Morningstar and FE