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Lyttleton rejects calls to thin out absolute funds

BlackRock absolute alpha fund manager Mark Lyttleton has dismissed calls for a rationalisation of the absolute return sector as some funds struggle to make the grade.

Speaking last week at a BlackRock round table, Lyttleton acknowledged that the sector had seen a swathe of new entrants but said he was not in favour of a split. He said: “It is very hard to piegonhole things. My view is leave it all in one blob and let the investors decide which are the best ones.”

He is “cautiously optimistic” that the global economy will slowly heal itself and said the financial system is stronger than six months ago as banks have raised a lot of new capital.

He is more cautious about the UK due to rising unemployment and said the huge Budget deficit will drag on the economy in the medium term.

Lyttleton said making shorts is tricky due to market optimism heralding a new bull market.

He reduced the number of shorts in the absolute alpha fund at the end of 2008 as the holdings had fallen and much of the alpha had been captured.

He said: “Shorts are tricky as everyone is seeing green shoots, but I think that will change in the next few months as more reality comes into the equation.”

Hargreaves Lansdown senior analyst Meera Patel says: “If a fund is down by 0.5 per cent over one year, there is room for forgiveness. If it is more than 10 per cent down, that is not meeting the objective and it should not be labelled as absolute return.”

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