Robert Harley, fund researcher at Bestinvest, said: "The BlackRock UK Absolute Alpha Fund has now struggled to achieve its performance target with any consistency over the past three years, culminating in a particularly poor 2011.
"The manager has also suffered from poor performance across his long only UK equity mandates. We have reduced our fund rating to a 1 star sell."
In Bestinvest’s rating scale one star is given to "poor funds expected to underperform considerably".
Towards the end of February, Portfolio Adviser revealed that Lyttleton was to come off the BlackRock UK Fund, leaving Nick Little as sole manager from 1 March.
At the time BlackRock said the change to Lyttleton’s duties would "allow him to focus on his higher alpha strategies" – the UK Absolute Alpha and UK Dynamic funds.
The BlackRock UK Absolute Alpha Fund was launched in 2005 and was the first to take advantage of the Ucits III regulations allowing long/short equity exposure to be provided for UK retail investors.
Following a strong performance in its first few years the fund faltered in 2008 and has shown patchy form since.
This forced Lyttleton to write to investors at the start of 2012 explaining his poor performance, which he admitted "with no shortage of contrition" was "due to picking the wrong shares".
At its peak in 2008, the fund was up at £2.8bn in AUM, but it ended 2011 at £1.22bn and now has £1.16bn in AUM, suggesting some investors are ahead of Bestinvest’s suggestion to sell.
As with all absolute return funds, the mandate of the fund is to aim to deliver a positive return across all market conditions.
Lyttleton is not the only manager to have disappointed in this arena, something Portfolio Adviser looked closely at last week.
Click here for the worst culprits.
Cumulative returns on Lyttleton’s fund over five years are 16% and over three years are 6%, but his discrete performance shows a loss of 5.5% last year and of 1.7% in 2008.
