We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Has Blackrock Absolute Alpha lost it's shine?
Comments
-
Though a loss of around 2.5% in 3 weeks
Funds are not trading instruments.
I don't think it is wise to attempt to evaluate the performance of any Fund over such a short period. The minimum should really be about a quarter (3 Months) and even that period will often give a misleading reading.
Also the pricing of any Fund is completely opaque, and for a fund of this particular type even more so. Just as getting a decent idea of this Funds holdings is nigh on impossible, understanding the hedges being utilsised will be just as impossible, as will the pricing of them be. I would assume that they will be priced 'to worst' rather than to actual market values, as there won't be a liquid market in the instruments.
P.S. Hopefully the recent movements will finally destroy the ludicrous notion that this Fund is a substitute for Cash'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
-
turbobob, I expect it's mostly a slow decline in the value of the long positions, similar to the one reported for them in June in the call I summarise below. Earlgrey, I hold 17 funds in total and this is the only one that has been only down or no change for every trading day in July. So pretty consistent still, just the undesirable direction.
Worth remembering that monthly conference call recordings are available and the most recent was on the ninth of July. Here's a summary of the parts of that one that are about the Blackrock UK Absolute Alpha fund.
In June was up about 1.9% due to shorting and pair investing while the longs cost 0.8% of the possible performance. The fund size at the end of June was 1.2 billion Pounds and they don't think that this has an effect on its performance. The performance in July up to the ninth was described as disappointing.
It was defensively positioned with no major themes and it currently is at the low end of it's 5% to 15% net long range. Mark Lyttleton has been shorting for about five years at this point. On the ninth there were 25 long, 15 shorts and 23 pair positions. No individual long or short position is more than 1.7% of the total fund value and the average long has a higher value than the average short, as usual for this fund. As usual the primary goal is preserving capital while trying to make a gradual profit along the way.
If you want to look, past fund prices are available. Most recent significant drop was this one:
07-Aug-2007 106.90
16-Aug-2007 105.40 -1.4% -0.20% per trading day
While in July it's been this:
02-Jul-2008 120.80
21-Jul-2008 118.20 -2.15% -0.17% per trading day
Now back down to the level it first reached on 28 May.
Up to you to decide what you make of these things. For me it's pretty minor.0 -
P.S. Hopefully the recent movements will finally destroy the ludicrous notion that this Fund is a substitute for Cash
As you say, that's a ludicrous notion. Neither this fund nor the so far even lower volatility CF Arch Cru investment Portfolio are cash, however low their volatilities might be. This sort of fund is fine as part of a mixture with the usual long term investing approach.
I have something around 40% in cash at the moment.0 -
James, if it is due to long positions then there seems no correlation with the FTSE All Share. When that fell 5% from the beginning of July, the Blackrock Abs fell too. But when the FTSE changed direction rising 5% from the middle of last week the Blackrock Abs continued down.
The other curiosity for me is the consistency of the downward trend, albeit for only 3 weeks. Down or flat every single day. Possibly a consquence of the way the fund is valued but definitely the wrong sort of consistency.
A 2.5% downward blip would be nothing in any other fund but should we judge funds like this in the same way? Isn't their whole unique selling point that they should be different with minimal volatility in exchange for very modest returns?
It was the the UBS Absolute Return fund that made me wonder. That had a straight line performance as immaculate as Blackrock's for over two years without a single continuous fall of more than 0.5% throughout until last July when it began to fall. The previous upwards consistency reversed and it's since fallen without hesitation losing 30%.
No one should expect the returns from an absolute return fund to match a conventional fund and the compensation is supposed to be the lack of volatility and, hpefully, lower risk. In a conventional fund a 30% fall wouldn't be unique but it shouldn't be expected in a fund of that kind where the upward movements have never come close to the indexes. The best it managed before the fall was just +6% overall when the indexes showed +40%. A high-risk, high-return fund is one thing but a high-risk, low return fund is another.
Indeed. I'm not suggesting for a minute that the Blackrock fund could do the same as the UBS but at a time when several more of these funds are being launched a little realism to balance the hype wouldn't hurt. Each of these Absolute Return funds are unique so there's no easy way to compare one with another. Without any real details of it's operation, investment in a fund like Blackrock is perhaps more an act of faith than judgement.P.S. Hopefully the recent movements will finally destroy the ludicrous notion that this Fund is a substitute for Cash
There's every likelyhood it will pull back within the next week or so but would still be intrigued for future reference why the pattern suddenly changed so noticeably.0 -
investment in a fund like Blackrock is perhaps more an act of faith than judgement.
Certainly agree
With less than 3 years track record, in a totally new investment class it is still too early to judge exactly where Funds like these fit in a long term portfolio.
The Blackrock Fund did a job for a period, and hopefully will continue to do so and there is no reason why it can't perform well in a sustained bullish market, but no definative judgement can be made yet.'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
Possible reasons for the fall:
1. ex-distribution on July 1st
2. ~7% bias towards resource sectors this month has been a poor play.
3. Big fall in various long positions (Dolphin Capital Investors, Dawnay Treveria, SVG Capital)
4. Bad pairs trading? Hard to get up-to-date info here but if they've still got the long HBOS and short Lloyds TSB position that'll be in the red!
The principle of pairs is relatively simple and this fund is very conservatively run compared to a traditional hedge fund. Click here for an article explaining pairs trading and here for an explanation of the fund in the managers' own words."The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.0 -
I jumped out yesterday and now holding cash pending BlackRock's reply. When in doubt, go to source. I asked them for an urgent response as to why the fund is heading South. It might seem naive to ask, but often directly confronting the situation and asking simple questions gives the answer you want. Pondering on this or that possibility still leaves you in the dark. I was prepared to assume that the early fall-away 1st-3rd July was because the fund went XD. That obviously is not the case. As soon as I get a reply which is clear and concise from BlackRock, I'll post the reply here.0
-
earlgrey, this fund is trying to hold defensive shares at the moment and it's not really surprising that defensive shares may fall in value when the FTSE All-Share rises in value.
I don't think that the returns are only modest. Consider this chart and the numbers:3 mon 6 mon 12 mon 12-24 mon BlackRock UK Abs Alpha (red) 1.37% 6.39% 11.72% 10.63% ING Direct Savings (yellow) 0.95% 1.97% 4.01% 3.67% Invesco Perp Income (blue) -9.33% -5.89% -17.26% 24.08%
If it returns 10-11% every year with low volatility then it's doing fine given the much more volatile 12% or so that you might see from a UK index fund or lower return that you'd expect from cash. I'm after more for my really long term investments but I'm happy to accept much more volatility than this to get it.
I'm not surprised if this downward move that's lasted for a few weeks is unsettling some people, particularly those who first bought it recently and may be uncertain whether switching some money into it was a mistake.
For anyone who is unhappy with that sort of switch, it's worth considering whether even this fairly low volatility fund is suitable for you. Things like this will happen again and while I think that you've been unlucky in the timing, you do have to be comfortable with where your money is.
If you're uneasy you might consider selling half of what you hold of this and keeping that other half in cash (inside your ISA still if that's where it is). That will make the volatility of the combination less then half of what holding just this fund would be. Then decide again one month from now: put half of the remainder into cash or put half of the cash back into the fund. Repeat until comfortable again. If it continues moving down this will gradually move you out of this fund, if this is just a blip it'll gradually move you back in.0 -
I'm going to send a repeat request to BlackRock again, as the previous question was ignored and was obviously too much for them to cope with ie 'why has the fund persistently dropped in value the past 3 weeks?'
Incidentally, you might all be interested to know that they aren't even sure how much the distribution will be on 31 August and, even worse, XD lasts 2 MONTHS!! Now that's what I call keeping investors aka their customers in the dark. Please read the attached
Dear Dr Gold,
Thank you for your email and I apologise for the delay in responding to your enquiry.
Please be advised that we are unable to confirm the expected distribution and therefore, any likely increase in units price for this Fund as the payment has not yet been authorised. Once this has been authorised, which we expect to be nearer to the pay date of 31 August 2008, the information will be available to view on our website or by contacting our Investor Services Team on the telephone number below. For your information, the ex-dividend interval lasts for 2 months, immediately prior to the payment date.
To help you track the performance of this Fund, I have attached a link to the performance section of our website:
http://www.blackrock.co.uk/IndividualInvestors/FundCentre/Prices/FC_3624?mpid=FC_3602
Should you have any further queries, please contact our Investor Services Team on 0800 445522.
Yours sincerely
Cheryl Hayward
Client Communications
BlackRock0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 351.6K Banking & Borrowing
- 253.3K Reduce Debt & Boost Income
- 453.9K Spending & Discounts
- 244.6K Work, Benefits & Business
- 599.9K Mortgages, Homes & Bills
- 177.2K Life & Family
- 258.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.2K Discuss & Feedback
- 37.6K Read-Only Boards