BlackRock explains the thinking behind UK Absolute Alpha
Tue Sep 21, 2010
In 2001 the UCITS III framework came into force and for the first time it brought hedging strategies to the mass affluent market.
Prior to the framework most traditional asset management firms only had bull market product ranges – they were single direction, long-only and relative return funds.
One of the first asset managers to take advantage of the new rules was BlackRock, now the largest asset management firm in the world.
In 2005 it launched the UK Absolute Alpha fund, one of the
first and now largest funds, to use hedge strategies funds
within the UCITS III wrapper with an aim to generate a positive
return in the long term.
When the rules came out, Tony Stenning, head of UK retail at
London-based BlackRock, says for the first time realised that
the new wrapper could potentially generate an absolute return
within a regulated environment.
He says: "When the most recent rules came out we noticed that
over-the-counter-derivatives were included in the framework
which allowed us to use swaps (we use contract for difference)
and we could now go short within the wrapper so long as it was
a transferable security."
Investors are generally happy when the investment firm
generates a positive return and are disappointed if investment
managers underperform a rising market, Stenning says. The
conversation is very different however, if,...
ISSN: 2151-1845 / CDC10004H
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