Lyttleton has run funds at BlackRock since 2001 and is currently responsible for more than £1.3bn of assets, but will leave his post this Thursday.
Nigel Ridge will be appointed co-manager of BlackRock UK Absolute Alpha alongside Nick Osborne, while Nick Little will become sole manager of BlackRock UK Dynamic, which will be merged with the BlackRock UK fund he already runs.
Darius McDermott, managing director at Chelsea Financial Services, says that despite the early signs looking good for the funds’ new management teams, he thinks investors should wait and see before deciding what action to take.
"Chelsea has both funds on a 'hold' rating and this will remain in place with the new managers," he said.
"It is a shame that Mark's time at BlackRock has ended on a less than positive note, but we wish him well for the future," he said.
BlackRock UK Absolute Alpha, currently £625m in size, is one of the oldest funds in the controversial IMA Absolute Return sector, having been launched in 2005 under Lyttleton’s management.
The early results were good, with the fund making sector-leading returns in 2006 and 2007, before gaining 1.8 per cent in 2008, a good result for a defensive fund in a year when the UK market crashed.
However, in 2011 the fund lost 7.06 per cent in a down-market and followed this up with returns of just 0.3 per cent in 2012 – 55th out of 70 funds in the sector.
So far this year the fund is down 2.28 per cent while the average fund in the sector has made 6.45 per cent.
Performance of fund vs sector over 3yrs
Source: FE Analytics
The fund is now down 6.94 per cent over three years and 0.67 per cent over five, with the sector making 7.65 per cent and 15.71 per cent over these periods.
The £632m BlackRock UK Dynamic fund has a strong long-term performance record, returning 160.86 per cent over 10 years while the average fund in the sector has made 151.16 per cent.
Most of its outperformance came in the earlier part of the decade, with the manager struggling to recover from heavy losses in 2008. The portfolio is bottom quartile over one, three and five years.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
McDermott says it was a shame to see Lyttleton struggle in recent years, but adds he has a positive outlook for the two BlackRock funds.
"Having had a great long-term track record, Mark went through a couple of years when his funds performed very badly," he said.
"After a short sabbatical last summer, which was taken for personal reasons, six months further on he has obviously decided enough is enough."
"The merger of the UK Dynamic fund with the UK fund run by Nick Little (subject to shareholder and regulatory approval) is probably a sensible option as there is a large overlap in company names, albeit with different weightings."
"Nick has made a reasonable start since taking on the UK fund in September 2011, with better performance in the last six months or so. It is still early days and hopefully he can do the same with a larger combined fund."
Nick Little took over the £467m BlackRock UK fund in September 2011.
The fund has returned 27.33 per cent over this time, meaning it has underperformed against its peers but has beaten its benchmark – the FTSE All Share – which has returned 26.67 per cent.
"Nigel Ridge, who will co-manage the UK Absolute Alpha fund with existing co-manager Nick Osborne, has a good track record on BlackRock's UK Equity Hedged fund, which has returned positive numbers each year since 2005," McDermott added.