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BlackRock defends performance fees for UK absolute alpha

BlackRock has defended using performance fees on its £1bn UK absolute alpha fund.

The fund, managed by Mark Lyttleton and Nick Osborne, has a performance fee of 20 per cent of any outperformance of the fund’s cash hurdle, which is set quarterly.

To get this fee, the managers must also outperform a high water mark, which is set annually.

Speaking at the Cofunds absolute returns round table last week, Osborne said: “The performance fee on the fund aligns our interests with the clients’ interests. We have a hurdle which is three-month Libor and a high water mark that grows at the rate of Libor on a daily basis. As the high water mark is always growing, it gives us a challenge to beat that.”

Cofunds head of commercial Russell Lancaster said his research shows that nearly 30 funds in the absolute return sector have a performance fee structure.

Standard Life Investments global investment strategist Richard Batty, who is part of the team that runs the £11.2bn global absolute return strategies fund, said he is against performance fees on absolute return funds.

He said: “We have a flat fee and we are not incentivised to take excessive risk. We are mandated to hit a target return and if you are incentivised to take excessive risk to beat that target return by a large amount, this is where you come unstuck. We think a lot about the risk we are taking.”


Schroders mulls fund for IMA mixed 0-35% sector

Schroders is considering launching a multi-asset fund in the Investment Management Association’s mixed investment 0-35 per cent shares sector. The category was added as part of the IMA’s overhaul of the managed sectors last year. Its launch on January 1 was delayed until later in the month due to low demand. There are now 25 […]

EU has Government over a barrel on Nest

Advisers say the Government is hamstrung by European state aid rules after it rejected calls from MPs to scrap restrictions on Nest ahead of the 2017 review. In March, the work and pensions select committee published a report calling for Nest’s £4,200 annual contribution cap and the ban on transfers in and out to be […]

Investec appoints Nelson and Whall for global energy fund

Investec has appointed Tom Nelson and Charles Whall to manage its global energy fund, Money Marketing understands. Nelson joins from Guinness Asset Management while Whall is joining the firm from Newton. Last month Investec announced the departures of Mark Lacey and Jonathan Waghorn, co-portfolio managers of the Investec global energy strategies. The pair are set […]

Threadneedle adds to fixed income team

Threadneedle has made two senior hires for its fixed income team after the recent restructure of its fixed income capability. Clifford Lau has been appointed into the newly-created role of head of Asia Pacific fixed income in Singapore and Zara Kazaryan joins as emerging markets debt fund manager in London. Lau joins the firm from […]

Stop the cold-calling

Royal London is pleased to support the petition calling for a ban on cold-calling for pension and investment products. The petition, launched by IFA Darren Cooke of Red Circle Financial Planning and hosted on the Parliamentary website, calls on the Government to ban cold-calling for pensions and investment products. A similar ban is already in force […]


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