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Should investors worry about Blackrock’s Wharrier exit?

mark_wharrierInvestors holding the £411m BlackRock UK Income fund should not be alarmed by the departure of high profile fund manager Mark Wharrier, fund selectors have said.

Today, BlackRock has announced that Wharrier, who also had stints at NewSmith Asset Management, Merril Lynch and Mercury Asset Management, will be leaving the US giant asset manager after six years to join Troy Asset Management.

At BlackRock, Wharrier was also manager of the Income and Growth Investment trusts.

Starting in October at Troy, Wharrier will be assistant manager on the £3.5bn Trojan Income fund alongside manager Francis Brooke and assistant manager Hugo Ure.

BlackRock’s David Goldman will now be co-manager on the Income and Growth trust with immediate effect, while colleague Adam Avigdori will continue as co-portfolio manager.

Chelsea Financial managing director Darius McDermott says the move from Wharrier is not a significant one for BlackRock or not as such of that that led to a major portfolio restructuring of the fund in recent years.

Since September 2013, following a year of underperformance, the BlackRock UK Income fund has had a new investment process with a much more measured approach focusing on higher-yielding cash firms as well as growth names and stocks picked at the periphery.

McDermott says: “BlacRock is in a good place. If I owned the fund, I wouldn’t sell it.”

AJ Bell head of fund selection Ryan Hughes says investors should be reassured by the “element of continuity” Goldman and Avigdori have for the BlackRock fund, despite Wharrier’s departure being “a disappointment” for the firm.

But while fund selectors welcome Wharrier’s move, Morningstar sees his departure as “a material change” and has therefore placed the income fund under review. The fund currently has a rating of four out of five stars at the research firm.

Morningstar senior analyst Peter Brunt says: “The BlackRock fund has two managers instead of three now. Mark was the lead team member. We have decided to put the fund under review but no decision on a re-rating has been made yet.”

Morningstar says the BlackRock fund has been a strong performer under the current managers, with the fund ahead of the FTSE All Share Index and UK equity income Morningstar category average to the end of February.

“Extra help”

An analyst, who asked to remain anonymous, says it is not clear why Wharrier has decided to take on a fund assistant role at Troy given his 23-year investment career in UK equities.

He says: “The only question I have is why [Wharrier] has gone from being a big fish in a big pond to a small fish in a big pond.”

McDermott adds: “It is evident Trojan is growing and they needed someone with experience looking at similar type of companies.”

Troy’s Brooke has topped the list of leading UK income managers by total return over the last ten years, beating Mark Barnett and Neil Woodford, Hargreaves Lansdown recently said in a report.

Hughes says: “This is a big opportunity for Troy to bring its income fund up, adding some extra help. The Trojan Income fund had a bit of a struggle in the last year.”

As of today, the Trojan Income fund has outperformed the IA UK Equity Income sector returning 31 per cent versus 23 per cent of the benchmark over a three-year period, according to FE. Over five years, it saw returns of 72.5 per cent versus 70 per cent for the sector.

However, over the past year the fund significantly underperformed the sector returning 7.9 per cent against the 17.6 per cent for the sector.

Hughes says a possible reason of temporary underperformance for the fund is its exposure to some large cap quality income brands such as Unilever, which have had “a pause” last year.

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