Has Blackrock Absolute Alpha lost it's shine?

earlgrey_3

Or has Mark Lyttleton, the manager, lost his touch?

After an incredibly consistent upwards performance the much vaunted Blackrock UK Absolute Alpha fund has been consistently heading south since the beginning of July. Though a loss of around 2.5% in 3 weeks isn't huge, it's out of character for this fund and is more than the fall of FTSE All Share over the same period.

Other 'absolute return' funds have been less absolute than they hoped but Blackrock's was previously the exception. What's happening now? Has Lyttleton's luck just run out or is there something else going on? Perhaps the fund got too big to manage? How long before it returns to it's old consistent ways, if it does?

LongTermLurker

Glad I avoided jumping on the bandwagon - I was seriously considering this one.

wombat42_2

Jesus - give them a break. The "Absolute Return" process using shorting is far from an exact science. If you look at the first few weeks the fund started it performed badly but has generally done extremely well since. It is remarkable that the fund has been so consistent most of the time. Some other "Absolute Return" funds have not performed at all well.

earlgrey_3

I think that's the point: what's changed? Is it the strategy or the luck?

You were asking:

wombat42 wrote: »

This fund is designed to never go down and it doesnt seem to have so far. It returned about 10% last year. So is it effectively as safe as a cash savings account ?

The answer seems to be that it isn't.

The fund has consistently fallen without a single rise since the begining of this month. That's fairly unusual in any fund. Would be interested to know why.

cepheus

I sold out of this last week, it seemed to be dropping when the overall market moved up and down. Perhaps if I had a better understanding of the fund and what hedging strategy is used in detail I may have been persuaded to stay with it, but generally relying on someone else's decisions for long term hold is not my style.

turbobob

If it carries on losing on a downward trend over several months then I'd consider switching out. As it stands I consider it pretty much "to be expected". It is a stockmarket investment and not cash after all, and there are risks. I wouldn't pretend to know that much about the inner workings of this, but my hunch is they've been caught out by some of the market weirdness of the past few weeks. Just general anomalies in share price movement. Perhaps some attempts to short companies or pair trades have gone against them?

ManAtHome

Whether you're shorting or longing, still gotta guess right... I'd be surprised if anyone following a logical/economic plan was guessing right at the moment - maybe once the "the lads" have secured their mmegabuck bonuses for this year, things will get back to economic fundamentals..?

purch

Or has Mark Lyttleton, the manager, lost his touch?

What seems to have been lost in all the 'hype' surrounding this and other Absolute Return funds is their high risk nature.

The 'hype' has tried to make out that these are low risk funds, which couldn't be further from the truth.

I bought into this fund at it's launch, and I am going to stay in it for a lot longer, as it will take a long time before a proper evaluation can be made, but I have never ever considered the fund anything other than a tool for diversification of my portfolio, not a low risk guaranteed return vehicle.

RayWolfe

Has the hype lead to a large increase in the fund size? Often a small fund fails completely when it becomes popular and large.

wombat42_2

UBS Absolute Return fund is a disaster area:
http://www.h-l.co.uk/fund_research/security_details/sedol/B06CMC5.hl

turbobob

wombat42 wrote: »

UBS Absolute Return fund is a disaster area:
http://www.h-l.co.uk/fund_research/security_details/sedol/B06CMC5.hl

Ouch! Its downturn seems to have coincided with the sub-prime mortgage crisis and the credit crunch. Wonder if it was invested in mortgage related securities or derivatives??