Bsp 422 - Blackrock Uk Equity Fund

BSP422 - FINANCIAL MARKETS AND INSTITUTIONS

BLACKROCK UK EQUITY FUND

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8TH DECEMBER 2017 (WORD COUNT – 1169 see Appendix 5)

SOUNDARYA SIVASUBRAMANIAN (B714624)

SHREYA GARG (B715470)

FUND OVERVIEW:

Blackrock UK equity fund is managed by blackrock Inc. which is based in the United States and it is the world’s largest asset management firm and is being operated in 30 countries with clients in 100 countries. Blackrock Inc. is also called as the world’s largest shadow bank1 due to its power.

    The blackrock UK equity (BlackRock UK Equity Fund Class I Dist. GBP) is a large cap hybrid fund. The share class launch date is 15th October 1971 and the fund launch date is 31st January 1992. The Bloomberg ticker for the fund is MRCUKEI and the London stock exchange ticker is GB0005803316(international securities identification number). The benchmark index for blackrock UK equity fund is FTSE All-Share TR index. Morningstar rating for blackrock UK equity fund is four stars out of five for the 10-year period. This is the overall morning star rating for blackrock UK equity fund, class I, as of 30th November 2017. This fund has been rated against 667,558 and 419 UK large cap blend equity funds.2

   The initial investment of the fund was £5 million and the current value of the fund is about £307.694 million (as of 1st December 2017). The cumulative return for the last 10 years is 101.40% whereas the cumulative return of the benchmark index is only 70.99% as of 31st October 2017. The fund has grown about 1474.72% since its inception. The fund is managed by blackrock fund managers limited and its key portfolio managers are Luke Chappell, Imran Sattar and Roland Arnold.

 INVESTMENT STRATEGY AND COSTS:

The following is the investment strategy of the blackrock UK equity fund as stated in its annual report. “The BlackRock UK Equity Fund aims to maximise the total return to investors from a combination of capital growth and income by investing largely in the ordinary shares of United Kingdom companies in any and all economic sectors. The Fund is intended for investment by bodies such as pension funds. The Fund may also invest in collective investment schemes.”

   The bid price of the fund is 19.81 and the offer price is 19.95. Moving on to the portfolio structure, about 98.35% of the fund is invested in equity (major reason being an equity fund). The other 0.79% is invested in fixed income and cash. The majority of investments are made in the UK in the following sectors namely: Consumer services, Financials, Industrials, Consumer goods, Oil and gas.

A detailed description of the portfolio is given in the fund fact sheet which is attached below in the appendix.3 The annual management fee is 0.50% and the cost for managing and operating the fund is 0.53%. This is the ongoing charges4 which includes the management fees and other expenses such as trustee, custody, transaction and registration fees and other operating expenses.

Dividend is paid half yearly.

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1shadow bank refers to non-bank financial intermediaries which provide similar services as that of commercial banks but outside financial regulations. They include money market funds, pension funds, insurance companies, trusts, credit unions etc.

https://en.wikipedia.org/wiki/Shadow_banking_system

2 https://www.blackrock.com/uk/intermediaries/products/228462/blackrock-uk-equity-fund-class-i-inc-fund#/

The black rock website provides full details regarding the returns, holdings, performance and the key facts of the fund.

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4on going charges is calculated by dividing the total cost of the fund with the total assets of the fund and it is expressed in percentage.

INVESTMENT PERFORMANCE:

The blackrock UK equity fund has grown substantially since its inception, the growth rate is about 1474.72% compared to the benchmark index (FTSE All Share TR Index) which is only 1307.35%.5 The chart in appendix 1 and 3 show the growth rate of the fund since its inception till 31st October 2017. The fund has clearly outperformed other benchmark indices such as the Lipper global equity UK and the FTSE All-Share TR Index.

Blackrock has been a supernova stock with the price of the shares rising from $14 at the time of its IPO to $511 as of 6th December 20176. The company is expected to double its assets by 2025 to $20 trillion. In 2009 the company became the world’s number one asset management overtaking vanguard and state street global.

      The equity beta7 of the fund is 0.926 (92.6%) which is less than 1. This indicates that the security is less volatile than the market. The price of the security fluctuates steadily over a period of time.

BlackRock UK Equity I Inc. (LP60010560) (cumulative performance in %)

As of 31st – Oct – 2017

(Source: Eikon)

In the above table the fund is compared with its benchmark indices namely the FTSE All Share TR Index, FTSE 100 TR and the Lipper global equity UK. The fund has performed well in the long-term against all its benchmarks. When we take the 6-month growth, the fund has outpaced all the benchmarks except the Lipper global equity UK. But this is also a marginal difference and it doesn’t have any impact on the fund.