BlackRock UK Special Situations: Fund hunting for firms that will win in recovery - including unloved banks

By Johanna Gornitzki, Financial Mail on Sunday

Published: 16:19 EST, 3 August 2013 | Updated: 04:19 EST, 5 August 2013

The economy is on the road to recovery and driving the growth are smaller and medium-sized companies.

And that’s music to the ears of Richard Plackett, who co-manages the £1.9billion BlackRock UK Special Situations investment fund.

The fund invests mainly in UK shares with a bias towards medium-sized and small firms. It has done well in the downturn, returning 69 per cent over the past five years and ranking 61st in its peer group of 240.

Blackrock UK special situations

Plackett says: ‘There is strong evidence that small to mid-sized firms do best when the economy improves. And when it goes well for them it bodes well for us and investors.

‘Until the end of 2010 we avoided companies exposed to the UK domestic economy due to the recession and better growth prospects in other parts of the world. But from 2011 we began to add holdings in companies exposed to the domestic economy. These have driven the fund’s performance recently.’

Plackett likes the industrial and technology sectors, which he believes offer fast growth prospects. The biggest weightings include engineering software company Aveva Group and engineering firm Senior.

Eye for detail: Richard Plackett knows smaller firms

But while he favours smaller companies, Plackett still holds larger capitalised stocks.

He says: ‘In certain sectors there are no real growth opportunities for smaller firms so larger companies are a better buy.’

He believes banking to be one such sector and holds HSBC and Barclays. Leading advisers like what Plackett is doing.

Darius McDermott, managing director of fund discount broker Chelsea Financial Services, says the fund has a ‘very impressive’ record.

‘Plackett has outperformed the average fund in the sector and the FTSE All-Share by around 4 per cent a year over the last five years after fees have been deducted.

‘As long as the UK stock market continues to perform well, I have every confidence this fund will continue to outperform its rivals.’

Gavin Haynes, managing director of Bristol-based adviser Whitechurch Securities, says: ‘Plackett’s extensive research, building up an in-depth knowledge of medium and smaller companies, which are traditionally under-researched compared to blue chip stocks, has been instrumental in him beating the market.’