Why we’ve taken two UK names off our Favourite funds list

Following a review of our UK active fund selections, we’ve decided to remove both the BlackRock UK Special Situations and BlackRock UK Income funds to consolidate our number of UK picks and to ensure we’re only selecting our highest conviction ideas.

We’ve removed the BlackRock UK Special Situations fund due to a decline in our conviction in the fund relative to others on the list. Whilst we continue to regard lead manager Roland Arnold as a credible investor, there’s been a reshuffle of UK funds and personnel at BlackRock in recent years which has coincided with disappointing performance in the fund.

This reshuffle has caused us to question the amount of focus the team can give to assessing larger companies, which make up 40-50% of the portfolio, given their smaller company specialism. Overall, we now have higher conviction in our remaining growth-orientated UK funds on the list, which are also available at lower fees.

We’ve also removed the BlackRock UK Income fund from the list. This is driven by our stronger conviction in other income-generating UK equity funds. Whilst we still consider the fund to be a solid offering, there’s been a decline in the amount of active risk taken in the fund in recent years, meaning the portfolio has become more similar to its benchmark, and therefore its passively managed competitors. We prefer to see more active management when investors are paying active management fees.