Richard Plackett, manager of the BlackRock UK Special Situations Fund, is reasonably optimistic in his outlook for 2013. Although low economic growth looks set to remain this year, he believes data from the US and developing world suggests economic weakness is largely confined to Europe. In the UK, he anticipates the government will continue with its quantitative easing programme and expects the UK economy to benefit.
The fund differs to many others in the UK All Companies sector. It invests a significant proportion in higher-risk, small and medium-sized companies, currently around 50% of the portfolio. Blending these companies with larger names can reduce volatility compared to funds investing purely in smaller companies.
Investing throughout the spectrum also provides diversification across a number of sectors. For instance, larger companies often fall into the consumer goods, financials and healthcare sectors. Although, the fund invests in these areas, its flexibility to invest in smaller companies allows significant exposure to more economically-sensitive sectors such as industrials and technology. Richard Plackett will move aggressively between larger and smaller companies depending on his outlook. If he is cautious, the weighting in larger companies will increase as they tend to be biased to sectors with more defensive characteristics.
Richard Plackett believes the best growth is likely to come from firms with international exposure as he feels it likely the UK will grow more slowly than other parts of the world. A large number of smaller companies in the UK are world leaders in their respective niche markets, particularly in engineering or technology, so there is plenty of choice.
High quality stocks which have not been significantly affected by high levels of debt are a key feature of the fund. Richard Plackett seeks companies with solid balance sheets who have accumulated large cash reserves. He is happy to see companies build their cash levels, providing they have the intention of reinvesting the cash into new projects or returning the cash to shareholders via dividends.
Richard Plackett is a perfect example of a long term investor, running his winners and cutting his losers at the first sign of trouble. Indeed, 23 of the fund's 63 current holdings have been held in the portfolio since he took over management in 2004. He only selects those who he believes can deliver consistently throughout a business cycle.
In our view, the fund is a good choice for investors looking for long term broad exposure to the UK market. During his tenure, the fund has returned 150% compared to the sector average of 74%*, although past performance is not an indicator of future performance. It looks well-placed to benefit from global growth, though this does mean performance could be volatile if global markets suffer. The fund remains on the Wealth 150 list of our favourite funds across the major sectors.
|% Growth 01/01/08 to 01/01/09||% Growth 01/01/09 to 01/01/10||% Growth 01/01/10 to 03/01/11||% Growth 03/01/11 to 02/01/12||% Growth 02/01/12 to 01/01/13|
|BlackRock UK Special Situations Fund||-29.6||34.2||35.1||-8.6||18.2|
|IMA UK All Companies||-32.3||30.4||17.3||-7.1||15.1|
Past performance is not a guide to future returns. Source: Lipper. *Figures to 01/01/2013
|Fund manager's initial charge||5.00%|
|HL saving on initial charge||5.00%|
|Net initial charge||0.00%|
|Fund manager's annual charge||1.50%|
|HL annual saving||0.25%|