Lyttleton 'contrite' after poor stockpicking in 2011

BlackRock's Absolute Return manager Mark Lyttleton has conceded he took long positions in the wrong shares in 2011, leading to disappointing performance.

The manager of the £1.23bn UK Absolute Alpha fund saw the portfolio fall 6.8% last year (to 6 January 2012, according to Morningstar), as a number of stocks worked against the portfolio.

Lyttleton blamed holdings in oil sector and consumer-facing stocks all held within the long side of the fund for the negative overall return.

He said: "The majority of the fund's poor performance can be explained by picking the wrong shares.

"Our holdings in the oil sector were particularly disappointing, despite many of the companies growing their resource over the year and the price of crude staying stubbornly high. In essence, concerns over the ability of these companies to fund themselves became the market's only focus."

He added short positions in consumer stocks had performed well, but said these had been outweighed by negative stock selection on the long side of the book.

A number of Lyttleton's funds were dropped by fund buyers last year, including Bestinvest.

Assets have also tumbled in the UK Absolute Alpha fund amid the downturn in performance, with AUM falling by around £900m in the last 11 months (to 20 January 2012).

Lyttleton said 2011 had proved to be the "toughest year" ever for UK Absolute Alpha, adding: "This update is written with no shortage of contrition."

He has now moved to cut the number of holdings in the fund in an effort to improve performance, but said the investment model the fund uses is "not broken".

"With the changes we have instigated we are confident performance will return to levels more akin to what has been historically achieved," he said.