Lyttleton’s leave of absence was announced at the end of May and started on 18 June and he is expected to return to the helm of the fund on 17 September. In the meantime, the fund has been run by co-manager Nick Osborne.
Killik & Co’s head of research, Mark Gilligan, said net redemptions had continued to hit the fund, with its AUM down from £1.2bn at the start of the year to £840m. This is the same strategy that at its peak in 2010 had AUM of £4.3bn.
“We believe significant and prolonged net redemptions are not an ideal backdrop for optimal portfolio management,” Gilligan said, “This is especially relevant in the case of the BlackRock fund which has typically used an active management style and historically seen a meaningful source of performance generated from less liquid smaller- and medium-sized companies.”
Long-term problems
Killik & Co downgraded BlackRock UK Absolute Alpha to a ‘sell’ 12 months ago because of these headwinds. “Net redemptions have not relented and equity markets continue to prove challenging to long/short managers, therefore we reiterate our ‘sell’ stance,” Gilligan said.
He added that range-trading of global markets since the beginning of 2010 has led to a period of underperformance from long/short equity and equity absolute return strategies.
The hedge fund research index (HFRX) of global equity hedge strategies has fallen around 8% over this period against world equity markets that are currently up 20%. Against this backdrop BlackRock UK Absolute Alpha has fallen over 3%.
The fund was one of the original launches in the absolute return space, launched in 2005 with Lyttleton as manager.
It had a very strong performance in its first few years but has floundered at various stages since the financial crisis.
