Absolute return is a measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital. It is a way to measure the return of a particular asset over a specified period, such as a stock or a mutual fund, and is concerned with the return of a particular asset and does not compare it to any other measure or benchmark. Absolute return differs from relative return measures that are based on comparison to a benchmark.

Absolute return investing describes a category of investment strategies and mutual funds that seek to earn a positive return over time regardless of whether markets are going up, down, or sideways. Absolute return funds seek to make positive returns by employing investment management techniques that differ from traditional mutual funds, such as using short selling, futures, options, derivatives, arbitrage, leverage, and unconventional assets. Absolute return managers tend to be characterized by their use of short selling, leverage, and high turnover in their portfolios.

Absolute return funds are sometimes considered not to have a benchmark, but there is a common one: the funds should do better than short-dated government bonds (e.g. T-bills in the United States). Absolute return funds are examined separately from any other benchmark or standard, and returns can be positive or negative and may be considered uncorrelated to other market activities.

Having a portion of a portfolio invested in absolute return strategies is one way of helping to limit losses and potentially generating gains when nothing else is going up. The ultimate goal of adding an absolute return strategy to a portfolio is to achieve a higher Sharpe ratio, which measures the incremental return achieved per unit of risk taken, as defined by standard deviation.