The fund’s factsheet states that it aims to achieve positive absolute returns and is therefore not benchmarked against any UK equity index. The factsheet goes on to say that the fund intends to take full advantage of the ability to invest in derivatives "providing both long and synthetic short positions principally through the use of contracts for difference".
The following table shows the funds with the greatest weighting in BlackRock UK
| Fund | % holding in BlackRock UK Absolute Alpha |
| Architas - MultiManager Dynamic |
13.29 |
| HSBC - Open Global Return |
9.84 |
| CF -Tethys |
9.73 |
| IFDS - Chartwell Cautious Growth |
7.5 |
| F&C - MultiManager Distribution |
7.46 |
| LV= - Diversified Income |
7.38 |
| Solus - Multimanger Balanced |
7.15 |
| Solus - Multimanger Growth |
6.78 |
| Elite - Hasley Diversifier |
6.77 |
| F&C - Multimanager Growth |
6.71 |
The majority of these funds come from one of the three Managed sectors, showing that the BlackRock UK Absolute Alpha fund is popular with managers who have very different risk profiles. For example, the Architas MultiManager Dynamic sits in the IMA Active Managed sector, whilst the F&C MultiManager Distribution is in the IMA Cautious Managed sector.
Amidst the volatile environment of 2008 it is hardly surprising to discover that none of the funds listed were able to make anything like positive returns. The best performing fund from those listed is the HSBC Open Global Return which has lost 8.09 per cent in the last twelve months, outperforming its sector by nearly 4.5 per cent.
The best performance relative to sector comes from Architas MultiManager Dynamic fund which despite a loss of 14.13 per cent in the last 12 months outperformed the IMA Active Managed sector by over 6 per cent.
During the difficult conditions of the last 18 months, the BlackRock has boosted the performance of those multi-manager funds which have included it in their portfolio. Of course, the reality is that many multi-managers turned to the fund much more recently, and have therefore only reaped some of the rewards.
Given the uncorrelated nature of the IMA Absolute Return sector it is difficult to make many useful comparisons between the funds in the sector. However, we are able to say that the fund is roughly average in terms of its volatility, with many of the better performing funds being significantly more volatile.
Despite this, it hasn’t been all plain sailing for this fund. The fund managers had a difficult few months in the middle of 2008, some decisions were proved to be ill-founded and the fund’s performance – absolute and relative to its peers – suffered.
Performance of BlackRock UK Absolute Alpha fund
Source: Financial Express Analytics
Overall, however, a combination of the decent returns, which have been absolute for every year since its launch, and its average risk level means that this fund offers investors and multi-managers a chance to gain exposure to derivatives within in proven investment vehicle. As the number of funds in this sector widens BlackRock UK Absolute Alpha represents a safe choice within a supposedly safe sector.
So, whilst we might not be surprised at the level of interest the fund is receiving from retail clients, it represents a less obvious choice for multi-manager funds. It is very much a sign of the times that managers running aggressive multi-manager portfolios are looking to absolute return funds to provide a level of security against their usual long-only positions.