BlackRock, the world’s largest asset manager, has reimposed limits on new investments in a Europe-focused equity fund after a flood of fresh money threatened to outstrip the assets available for further allocations.
According to a shareholder note released Thursday by the U.S. firm, BlackRock’s risk management and portfolio management teams have decided to put a “soft close” on the European Absolute Return Fund. Effective Oct. 16, the move caps share purchases by new and existing investors to EUR 1.5 million ($1.8 million) per day until further notice.
The firm said it imposed the restriction in order to give the fund’s managers time to allocate capital efficiently and to prevent a potential shortfall of assets left to invest in. BlackRock added that it will reevaluate the long/short strategy’s capacity constraints and could reopen it on a temporary or permanent basis in the future.
The investment manager’s new measures come after the strategy saw EUR 1.2 billion ($1.4 billion) of inflows over the past four months, Citywire Selector reported. A BlackRock representative confirmed that the surge prompted its decision.
Blackrock in June had lifted an earlier cap on the active product, which had been closed since January 2019 amid capacity concerns. It eased the buying restrictions after assets dropped to EUR 1.2 billion.
That was the first reopening for the fund since August 2016, when assets stabilized at approximately EUR 1.8 billion ($2.1 billion).
The strategy has EUR 2.5 billion ($2.9 billion) of assets as of Oct. 16, according to BlackRock. It aims for a 70% exposure to Europe-listed equities, most of which are in the industrial, consumer, health care and information technology sectors.
As a long/short fund, it seeks to take long positions in underpriced stocks while simultaneously short-selling overpriced shares with the goal of profiting even amid market swings.
BlackRock saw net inflows of $129 billion during the third quarter of 2020, the firm said Tuesday, helping to push its assets under management to a record $7.81 trillion.