BlackRock fund manager Mark Lyttleton has slashed the number of holdings in the £1.1bn UK absolute alpha fund on the long and short side by 20 per cent to create a more “high- conviction” portfolio.
He has reduced holdings from 100 to 80, raising the stock concentration.
In 2011, the fund’s performance fell by 6.9 per cent. The realignment of the portfolio at the end of 2011 and start of this year has lifted performance, producing returns of 3.2 per cent so far this year, according to Morningstar.
Lyttleton says: “Last year was the fund’s first-ever negative year. The market was difficult, volatility was very high and we struggled with alpha generation. As a result, we spent a long time reviewing the portfolio, from the process and construction to the risk and position sizing.”
Lyttleton has also reduced the fund’s market correlation. He says: “There were moments last summer when the fund had a 60 per cent correlation to the market, due to the market volatility, cross correlation and stock specifics, and we have worked hard to take the correlation out. Correlation to the market is now 0 per cent.”
Hargreaves Lansdown senior analyst Meera Patel says: “It is good to see Mark Lyttleton putting conviction behind his best ideas, which is something a lot of other managers will not do. He has had a tough time but we would like to wait and see what this move brings in the longer term.”