News of BlackRock’s ousting of Allianz RCM as manager on the British Portfolio Trust will be a further blow to the asset manager, according to Winterflood Investment Trusts.
Analysts at Winterflood believe the loss of the British Portfolio Trust will compound the recent mandate loss of Charter European which is to be rolled over into the BlackRock Greater Europe investment trust.
Simon Elliott, head of research at Winterflood Investment Trusts, says: “The appointment of BlackRock, and the adoption of a UK equity income mandate, provides the chance for the fund to grow organically assuming that the fund can trade on a premium.
“It also provides BlackRock with the chance to manage a UK equity mandate for the first time since it lost Merrill Lynch UK, now known as Keystone, to Invesco Perpetual in 2002.”
There were concerns raised by Winterflood over the agreement, however, arguing that a merger or rollover into a fund within the sector “would have made more sense”.
Elliott says: “By choosing to remain ‘independent’, the board runs the risk of prolonging the life of a subscale vehicle that is unlikely to attract interest from wealth managers. (article continues below)
“The BlackRock management team have a good performance record but by offering a clone of an existing open-ended fund, albeit with gearing, it is not clear why investors would chose a vehicle that has potential for discount volatility risk.”
He adds: “The other unusual element of this deal is the performance fee. This is less common in the UK Income & Growth subsector and where it does exist is subject to caps of around 1% to 1.25%.
“BlackRock’s cap of 5% looks rich although, given the investment approach, we would be surprised if the performance fee would ever reach this level.”