In 2010 Mr Winship was tasked with building an unconstrained absolute return product to build BlackRock’s fixed income expertise. The £55.3m BlackRock Absolute Return Bond fund was launched in September 2011.
The manager explains: “BlackRock realised that in the past its products were built to take advantage of rates that were trending. As [Bank of England governor] Mervyn King puts it – “it was a nice time”.
“Now we are at levels of 1.3 per cent in bunds, 1.5 per cent in treasuries and gilts, so the question really is what to do from here. In an industry that is not that flexible, what do we do to products? How do we perform and make clients happy when we are faced with a number of different scenarios?”
The different scenarios, the manager adds, lie in China, where he suggests yields could go lower, the US, where market uncertainty continues, and the eurozone, which continues to battle against the sovereign debt crisis.
“For the latter part of my career we have spent a lot of time looking at central banks,” Mr Winship says. “[Mario] Draghi said something interesting [late last year] – ‘that now it is over to the politicians’ – and I think that’s right in terms of Europe, China and the US. Even Japan is seeing a new shape of government.”
He adds: “That tells me it is going to be volatile – it isn’t about the central banks, but the politicians.”
In building the portfolio, Mr Winship selects fixed income ideas from the group’s 45 related teams from around the world. There is a mix, he explains, of both fundamental and model-based approaches that span high yield, emerging markets, investment grade and the US, among others.
“This product is basically the best trades from the fixed income teams – we have got 28 teams in the portfolio at the moment and each has put their best ideas into the portfolio,” he says.
“It has been up and running for a year and we set a risk target that would allow us to hit a performance target, essentially asking how much risk can we run that will enable us to hit that performance target.
“We [Mr Winship and two colleagues who manage the portfolio’s risk budget] sit down every week and discuss the ins and outs of the portfolio, the risk options, the utilisation of risk from the individual teams, what their intentions are, what are the condition levels – we need to make sure the portfolio is still moving.”
From its launch to December 14 2011, the fund has returned 3.51 per cent compared with an IMA sector average of 3.49 per cent.
Mr Winship says: “There are a lot of disheartened people when it comes to high alpha fixed income products because the managers haven’t stated what they are going to do. Similarly, there has been a lot of angst and anxiety because a lot of absolute return products have turned out to be beta products and they are expensive. They haven’t done what they said on the tin.
“We wanted something that had a chance of performing every month, regardless of the conditions.”
Expert view
Jason Hollands, managing director for business development & communications, Bestinvest:“While this fund has a relatively short track record, manager Ian Winship has considerable experience in absolute return investing, having joined BlackRock from Brevan Howard in 2010. From launch this fund has delivered on its objective of generating positive returns on a rolling 12-month basis. The real test for this fund will come over the next year when the outlook for bonds is potentially more challenging, with spreads having narrowed. The fund can access a wide range of strategies and instruments.”
