FE Alpha Manager
Richard Plackett’s £1.5bn
BlackRock UK Special Situations is one of the largest funds in the IMA UK All Companies sector, with demand boosted by consistent top-quartile performance.
Plackett took over the portfolio in June 2004, since when it has been the sixth-best performing fund out of the 195 in the IMA UK All Companies sector.
According to data from
FE Analytics, it has made 145.38 per cent in that time, almost double the 74.91 per cent returned by the sector.
Performance of fund vs sector since June 2004
Source: FE Analytics
The five- and three-year figures are also top quartile, but Plackett’s lesser known and much smaller investment company
–
Throgmorton Trust – has substantially outperformed BlackRock Special Situations since he took over in July 2008.
Performance of funds vs sectors since July 2008
Source: FE Analytics
The trust has made 81.23 per cent over the past three years, according to
FE Analytics data, significantly more than the 47.81 per cent of BlackRock Special Situations.
Like the BlackRock fund, Throgmorton Trust has a significant small to mid cap weighting, but the investment trust has a higher proportion of its funds invested further down the market cap scale.
With total assets at just £164.5m, making it slightly more than a 10th of the size of the open-ended fund, Plackett and Mike Prentis have more freedom with regard to their investable universe.
Equipment rental group Ashtead, high-tech toolmaker Oxford Instruments and chemical company Elementis are all top-10 holdings in the trust.
The portfolio also makes use of derivatives to take short positions and to add gearing. It is able to hold up to 30 per cent of its funds in contracts for difference (CFDs), derivatives that allow the company to make money from stock movements without owning the underlying security.
James Brown, analyst at Winterflood Securities, said: "Prentis is largely responsible for the stock-picking on the fund, while Plackett takes charge of the long/short strategy."
"Plackett certainly has an impressive track record and has added value over the time he has been on the fund."
Throgmorton Trust is currently available at a discount of 17.69 per cent to NAV, according to data from
FE Analytics, despite the strong performance of the sector and the small cap index this year.
Performance of indices vs sector in 2012
Source: FE Analytics
The FTSE Small Cap index has delivered 21.24 per cent in the year-to-date, almost triple the 7.3 per cent returns of the FTSE 100; the average trust in the sector has made 23.82 per cent, while the Throgmorton Trust has made 25.2 per cent.
Brown says that the sector has a tendency to trade at a discount, perhaps because smaller companies are perceived as higher risk. He adds that the Throgmorton Trust also tends to be on a wider discount than its peers.
"I’m not sure why this is, but it may be because of the CFDs and the gearing. It may be that investors prefer a plain vanilla fund," he added.
FE Trustnet data shows the trust’s five-year annualised volatility of 31.2 per cent is substantially higher than that of the open-ended fund and the fifth-highest out of the 17 trusts in IT UK Smaller Companies, which may reflect the use of gearing.
Ian Scouller, analyst at Oriel Securities, says the Throgmorton Trust is one of his favourites in the sector, noting the ability to take short positions to add value as an advantage.
He explained that the high discounts in the sector mean there is value in the small cap trusts for anyone with a more bullish outlook, but added that they could also present an opportunity to take profits for those already invested.
Brown says that the economic sensitivity of smaller companies means that the decision to invest will depend on individuals' outlook for the economy.
"They have had a good run, but there’s no guarantee this will continue," he finished.
BlackRock UK Special Situations is available with a minimum investment of just £500. It has a total expense ratio of 1.67 per cent, compared with 1.29 per cent for the Throgmorton Trust.