Richard Plackett will step down as co-manager of the BlackRock UK Special Situations Fund on 30 September 2015. In light of the announcement, the fund was recently removed from the Wealth 150 list of our favourite funds across the major sectors.
Roland Arnold, the fund’s other co-manager, will maintain his existing position and he is joined by recently appointed co-manager Luke Chappell. We recently met the two managers to discuss their plans.
Both managers form part of BlackRock’s 18-strong UK team, within which all team members share ideas. Roland Arnold sits within the UK Small & Mid-Cap sub team and will continue to focus on small and medium-sized businesses for the portfolio. Luke Chappell is co-Head of the UK Equity Team. His research approach is similar to that applied to the UK Special Situations Fund, although he currently has greater focus on larger company analysis and he will therefore predominantly focus on ideas in this area of the market. That said, he will also contribute to small and medium-sized company research.
Roland Arnold joined BlackRock in 2000 and has co-managed the fund since August 2012.
Luke Chappell has managed UK-focused portfolios for institutional investors since 2004 and he has built a reasonable track record over this time, in our view. His BlackRock UK Focus Fund launched in October 2011, which is managed in a similar vein to his existing portfolios. Over this time the UK Focus Fund has outperformed the FTSE All Share index, although it has underperformed the IA UK All Companies sector average. Please remember that past performance is not a guide to future returns.
Performanace and positioning
After the UK Special Situations Fund went through a difficult period in 2014, performance has seen an improvement so far this year. Exposure to consumer businesses has proven beneficial; a number of house builders and retailers, such as Ted Baker, have performed well, although past performance should not be seen as a guide to future returns.
Several themes currently run through the portfolio, such as improving consumer confidence. To benefit, the fund invests in a number of domestically-focused UK companies with unique business franchises, which are benefiting from a strong trading backdrop or the roll out of new stores. Companies including Dunelm Group, Howden Joinery and Fuller Smith & Turner, the brewer and pub company, feature here.
The managers also invest in a number of banks, such as Lloyds and Virgin Money, which they expect to be beneficiaries of rising interest rates. Elsewhere they are seeing a pickup in global construction activity and have accessed this theme by holding companies including Bovis Homes and Bellway. Overall, the fund offers a concentrated portfolio which enables each stock to have a greater impact on performance; however, this is a higher-risk approach.
Our view on this fund
Roland Arnold and Luke Chappell will maintain the fund’s existing investment approach, which we view positively. They will continue to invest flexibly across companies of all sizes, including higher-risk smaller companies, with a focus on high-quality companies that they believe can grow sustainably over the long term. They will also continue to have the support of BlackRock’s well-resourced UK team, which provides extensive coverage of the UK market.
We are, however, disappointed to see Richard Plackett leave the group as we initially supported this fund for his experience and stock-picking talent. Therefore, at this time we will not be reinstating the fund to the Wealth 150. We will continue to monitor the fund and progression of the team, and will inform investors if our views change.