Speaking this morning at a BlackRock roundtable, the absolute alpha fund manager said he had reduced the number of shorts within the fund at the end of Q4 2008 and Q1 2009 as the holdings had fallen a long way, become smaller and a large amount of the alpha had been captured.
He said: “Shorts are quite tricky at the moment because everyone’s feeling green shoots and glass half full but I think that will change over the next few months as more reality comes into the equation.”
Lyttleton said the fund was a nice blend of different things going on and not over reliant on any one position.
He said he had not increased the sizes of the fund’s shorts and allowed them get too out of control and was waiting for a better opportunity to reintroduce them.
Lyttleton closed out his historic short on banks in January and now has a small net long in the sector and is a little short on life companies.
Lyttleton said the fund had also shorted bigger companies to gain more liquidity as some of the medium size holdings had previously become quite small and inherently more illiquid.
He said: “Over the last three months there are companies where we think the business model is challenged, the balance sheet is challenged, current trading is challenging and the share prices goes up 50 per cent because everyone thinks that green shoots are coming.
“You’re banging your head against a wall a little bit and we’ve had a bit of that and had some shorts go up against us, but that’s the nature of the fund.”