Difficult market conditions and internal uncertainty at BlackRock have not hampered the performance of the fund manager’s BlackRock Equitised Long Short Fund (BELSH), which outperformed the S&P/ASX 200 Accumulation Index by 13 per cent in the year to June 30.
The fund is ranked number one over the one, two, three and ten years to June 30 by the Mercer Investment Performance Survey of Australian Shares in the Australian Shares Long/Short Sub-Universe category.
BELSH has outperformed its index by an annualised 9.6 per cent per annum – gross of fees and taxes – since it was launched in December 2001.
Mike McCorry, BlackRock’s acting-country head and head of the Australian scientific active equity team, says the fund’s performance showed that long-short investing could deliver returns in a flat to negative market.
“The portfolio construction is entirely risk controlled,” McCorry said in a telephone interview.
“When we talk about being long-short, we are being market neutral and that means we are neutralising out what happens in the overall market to focus in on the relative returns of particular stocks.”
The attraction of market neutrality
McCorry said the fund, which now managed around $500 million across the institutional and newer retail components, had attracted increased attention from institutions over the last year.
“People are looking at the volatility and when they see a market-neutral strategy that can deliver in up and down times, that is pretty attractive,” he said.
While the personnel on the investment team had “changed over time,” McCorry attributed the fund’s performance to the “methodology and not the people.”
The fund looks at sectors and identifies stocks that BlackRock believes will outperform others in the sector.
Currently, for example, the fund remains bullish on Rio Tinto, a stock that has been in the doldrums of late because the miner has a diversified portfolio and is a producer rather than an explorer.
In the energy sector, the fund is more positive about Woodside compared with companies such as Origin and Santos because Woodside has completed more of its capital expenditure on new projects.
BlackRock launched the retail version of the fund, the BlackRock Australia Equity Opportunity Fund (BAEOF), in September.
BAEOF has received highly recommended ratings from Zenith Investment Partners and a four-star rating from Standard & Poors.