The absolute return or simply return is a measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital. The adjective absolute is used to stress the distinction with the relative return measures often used by long-only equity funds.
Absolute return strategies aim to produce a positive absolute return regardless of the directions of financial markets. They typically achieve this by investing the portfolio's assets in cash or other low volatility investments and then taking hedged long and short positions in portfolios of securities that when combined are expected to have modest exposures to market returns.
The resulting portfolio should have low correlation with financial market performance. Of course whether such portfolio actually delivers a positive absolute return depends on the skill of the portfolio manager in selecting profitable long and short positions.
Most hedge funds employ strategies that emphasize absolute returns over relative to some degree.