Blackrock, the world’s largest fund manager, has launched an absolute return fund that will invest in UK companies at an early stage of their life cycle which are expected to experience significant growth.
Portfolio manager Dan Whitestone said the the UK Emerging Companies Absolute Return Fund will use a long-short approach across the market-cap spectrum and will still include some large companies can still be considered emerging businesses.
Whitestone will be supported by Nick Little and the wider Blackrock UK team on the Ucits strategy. The team will assess a company’s real underlying earnings power and identify emerging structural changes within industries.
Whitestone told our sister publication Portfolio Adviser that emerging companies don’t have to be limited to the smaller end of the market-cap spectrum and in some cases he will look at mega-cap companies.
“We’re living in a world now where there are new ways of disruption coming through.”
“Companies with large cap can still double, triple and go up in size. For example, Amazon to me is still an emerging company, it’s still reinvesting its cash flows in to new verticals and attacking new profit pools, despite being a large cap.”
He said around 70% of the fund is UK firms and 30% is companies listed elsewhere, including the US and Europe.
The team is looking for companies that can either disrupt industries and/or are exposed to long-term secular trends that triumph over macro or economic cycles, he said.
UCITS VERSION OF CAYMAN IS HEDGE FUND
The fund expands Blackrock’s High Conviction Alpha suite of funds. This range forms part of the four suites that comprise Blackrock’s active equities platform: Systematic Alpha, High Conviction, Specialised Outcomes and Thematics.
Whitestone said the launch is similar to the Cayman-domiciled UK emerging companies hedge fund he already manages. It launched in 2004, but he has managed it for three and a half years since Richard Plackett’s retirement.
“Lots of investors who I’ve met on the road can no longer buy Cayman-domiciled funds and wanted to access the philosophy, the process, the management but through a Ucits vehicle.
“A lot of thinking and thought has gone in to how can we create a fund that gives people what they want in Ucits form.”
However, he explained that while it’s very similar to his Cayman fund, it’s not “a carbon copy”.
“It targets a slightly lower return profile, so it’s targeting 8-10% and I won’t be prosecuting some of the smaller, less liquid shares that I do in my Cayman fund,” he said.
FAMILY OFFICES AND WEALTH MANAGERS EYE NEW FUND
UK wealth managers, family offices in Switzerland and European institutions are among investors who have shown demand for the product, he said.
Jeremy Roberts, head of UK retail at Blackrock, said: “We are at a point in the cycle where absolute returns are an increasingly critical part of an investors’ portfolio and this is a fund where stock and industry specific outcomes can offer a source of uncorrelated alpha for clients.”
The ongoing charges figure is 1.41%. A 20% performance fee is applied for returns above the 3-months Libor benchmark.
