BlackRock gains A rating amid criticism of agency

Old Broad Street Research (OBSR) gave the BlackRock UK Absolute Alpha Fund an A rating last week, but some in the industry say that the ratings agencies have been too slow in rating absolute return products

The BlackRock fund was launched in April 2005, but has come to the fore this year as investors rushed into alternative strategies after equity and bond markets went into freefall.

On February 4, the firm announced that the fund had reached GBP450m in size as Mark Lyttleton and Nick Osborne’s long/short strategy started to gain traction. By the end of August, this figure had swelled to more than GBP1.5 billion as the fund took advantage of a near monopoly in the market for retail-focused absolute return vehicles.

Despite this surge in interest, some investors were, earlier in the year, cautious about moving into a fund that was yet to be rubber-stamped by the ratings agencies. As Fund Strategy reported (June 23, 2008), Dean Cheeseman, the head of multi-manager at F&C, said some IFAs were being hasty in recommending the BlackRock fund to their clients before OBSR had attached its name to the product.

By the time of Paul Carne’s arrival at F&C in early July, however, the UK Absolute Alpha fund had already made its way into the F&C fund of funds portfolios.

“I think [the OBSR rating] probably does give greater credibility, as many people would be unwilling to invest in a fund that wasn’t rated by them or their competitors,” says Carne. “Were they right to wait? I’m not so sure.”