Mark Lyttleton, who heads up the fund, joined MLIM as a graduate trainee in 1992 and was given his first (institutional) fund to run in 1994. In 1999, he took over higher-performance core funds with a retail bias, hence his tenure on the BlackRock UK fund.
The UK Equity Core team is headed by James Macpherson and comprises 11 fund managers. Lyttleton, however, views himself as between the Core and Specialist teams, as he has retail fund responsibilities, his mandates are more challenging and he enjoys rather more investment freedom.
There are four stages to the investment process. These are: company/industry analysis (focusing on whether this is a good business); management appraisal (is the business run by high-quality management); valuation (are the shares good value) and lastly catalysts (what forces may help to unlock or realise the value).
Lyttleton looks for clear catalysts on a six-to-18-month view. Once a stock has been purchased, he continues to regularly re-evaluate both the stock valuation and the progress on potential catalysts. He believes it is important not to be fearful of cutting a holding where the perceived catalyst is not materialising or where newsflow is throwing up negative factors.
The portfolio will typically comprise 50 to 70 stocks, with investments restricted to UK equities. The fund's target tracking error will be between 2.5 and 5.5 per cent. At least half of the names in the fund will be drawn from the UK Core team’s preferred stocks list, with relative weightings being directionally aligned with the team view. Around 30 per cent of the holdings will reflect investment themes identified by the UK Core team, while the fund manager has personal discretion over holdings amounting to around 20 per cent of the portfolio by value.
Ruli Viljoen, head of investment research at OBSR, said: "Mark Lyttleton has been managing this fund since Oct 1999, giving him experience across multiple cycles. He has used a flexible approach that we believe is well married to his experience."
"We have noted that stock selection has been somewhat weaker than we would have anticipated and the fund’s return profile over recent years when compared to both the index and peers has been disappointing."
Performance of fund vs sector and index over 3-yrs
Source: FE Analytics
"He has just been joined by co-manager Nick Little, who has more than 10 years’ investment experience, with a focus on large cap mandates," continued Viljoen. "While it is too early to judge the outcome of this move, we are encouraged by the success Little has achieved in his large cap mandates to date."
The views expressed here are those of Old Broad Street Research.