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BlackRock launches European Absolute Alpha Fund

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BlackRock has launched the European Absolute Alpha Fund, which aims to deliver positive returns across all market conditions by investing in equities and equity-related securities, incl

BlackRock has launched the European Absolute Alpha Fund, which aims to deliver positive returns across all market conditions by investing in equities and equity-related securities, including derivatives, across Europe.

The fund will be managed by senior portfolio manager Vincent Devlin (pictured), who has 15 years’ experience of managing European equities.

The fund can make full use of the wider investment powers permitted under the Ucits III regulations, in particular the use of derivatives.

The fund’s use of derivatives is designed to manage risk levels and reduce the volatility of returns. This enables it to have a much lower risk profile relative to traditional long-only funds investing in the European region.

The fund will hold between 50 and 100 names and will follow four principal investment strategies: long investing, where the manager expects the stock price to rise; synthetic-short investing, where the manager expects the stock price to fall; pair trades, where the manager combines a long position with a synthetic-short position in two stocks in the same sector creating a hedge against the sector; and cash, where the portfolio also has the flexibility to switch up to 100 per cent into cash if the market environment dictates.

The fund has been paper-traded since 12 June 2008 and BlackRock says it has produced strong absolute returns, despite exceptionally challenging market conditions.

Devlin says: "Investors should look on the fund as one that aims to give returns above cash using European equities to drive these returns – but without the downside risk normally associated with being in the market. It’s a stepping stone for cautious investors who want more than cash can offer, but with contained risk."

Alex Hoctor-Duncan, head of BlackRock’s UK retail business, adds: "BlackRock has an outstanding record in absolute return products, which are a valuable investment strategy in all market environments. The success and popularity of BlackRock’s UK Absolute Alpha Fund demonstrates the high level of investor confidence in the Fund’s ability to deliver positive returns. After months of stress testing we are pleased to announce the launch of our pan-European fund the BlackRock European Absolute Alpha Fund."

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