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BlackRock proposes absolute return definitions

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BlackRock is calling for absolute return sector definitions to take account of both the outcome and style of funds in the sector.

In June, the Investment Management Association outlined three options for the absolute return sector as part of its consultation.

The first option is to sub-divide the existing absolute return sector, indicating which funds are targeting more stable outcomes based on cash benchmarks. Other funds would remain within the existing umbrella sector.

The second option is to sub-divide the funds by hedge fund-style categories such as long/short or global macro strategies.

The third option is to keep funds within a single sector and allow it to grow but rename, redefine and supply additional information on the sector.

Head of UK retail business Tony Stenning says a combination of the first and second options, outcome and style, is the answer to categorising the absolute return sector.

The firm has three funds in the sector – the £55m BlackRock Absolute Return Bond, £37m BlackRock European Absolute Alpha and £837m BlackRock UK Absolute Alpha funds.

Stenning says: “It is incumbent on us to ensure that clients have some understanding of what the fund is trying to achieve and how it will get there. We think the amount of risk taken by the fund should also be taken into account.

“One fund could be low-risk and have the same outcome as another fund that is higher risk. There needs to be multiple-markers, which include cash benchmarks and style.”

Whitechurch Securities managing director Gavin Haynes agrees. He says: “If I was forced to go with one option, I would chose style but outcome is equally important.”

A decision on sector reform is expected by the end of the year.

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