Download New risks. New insights.

New risks.
New insights.
Portfolio construction
ideas and eye-openers
BL ACK ROCK
PORTFOLIO
SOLUTIONS
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The BlackRock Portfolio Solutions team assists advisors in all aspects of the
portfolio construction process, offering insight and practical strategies around
asset allocation, risk management, portfolio structure and implementation.
The team exists to help strengthen the bond between financial advisor and
investor by helping advisors improve their probability of making good on the
promise to help clients achieve their unique goals: to help them live the lives
they want and secure their financial future.
Key contributors to this report include:
Brett Mossman, CAIA
Managing Director and Head of
BlackRock Portfolio Solutions
Patrick Nolan, CFA
Director and Portfolio Strategist
Before engaging with the Portfolio Solutions team, advisors answer a series
of questions about their practices, views on the markets, and portfolio construction philosophy.
We incorporate this information when formulating solutions to their challenges.*
* Any findings reported, including those featured herein, are based on aggregated data. Individual details are confidential.
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Risk. It comes in many forms. To some, it’s volatility
of returns. To others, it’s simply losing money — either
Executive
summary
through market downturns or declining purchasing
power. And beyond investment risk, there are new
business risks and industry dynamics driving financial
advisors’ need to evolve their practices.
The investment landscape has shifted from one of high return and low risk to the opposite:
higher risk, lower return. With both near-zero rates and below-trend economic growth for nearly
a decade, coupled with stretched equity valuations, investors are hard-pressed to meet their
investing objectives without taking on more risk.
At the same time, the wealth management industry is changing, and financial advisors know
that their clients have more choices — in investment products, in advice models and in cost.
Value and results are more important than ever before — and we believe thoughtful and
disciplined portfolio construction is the key to maximizing both.
BlackRock’s Portfolio Solutions group, in working with thousands of U.S. advisors each year, is
uniquely positioned to see and analyze risk, both within and across portfolios. This allows the
team to surface insights that can help advisors tackle the challenge of portfolio construction
and build better portfolios that are aligned to their clients’ individual goals and objectives.
BlackRock was ranked #1 in the FUSE Research Network’s
2016 survey of advisors in all three portfolio construction categories covered:
Portfolio Construction Guidance, Model Portfolio Allocation Advice
and Portfolio Construction Specialists.†
† Sources: WealthManagement.com, FUSE Research, December 2016.
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Of robots and
regulations
Shaping better portfolios
The fiduciary triangle
Advisors have long worked to redefine the
value they provide to investors. Two recent
accelerators of change in the industry are
Objectives
new technologies and new regulation.
Wealth managers have been moving from
Build
i
investing in digital advice technology,
demanding lower fees from investment
products, and tapping into the popularity
Risks
of exchange-traded funds (ETFs). While
os
foli
rt
Better Po
ng
product selection to portfolio construction,
Costs
disruptive forces such as the Department
of Labor’s fiduciary rule and robo advisors
create a spirited dialogue, we believe the
underpinnings of both — doing what’s best
1
for the client, and improving the efficiency
of financial advice at a lower cost — are
trends that will endure.
Value through
portfolio construction
In a world of increased market risk and
2
an underlying imperative to deliver the
greatest value to clients, we believe
portfolio construction stands apart as
a critical and differentiating discipline.
Choosing individual securities is not
enough. Keeping costs low is not enough.
Advisors must consistently work to ensure
Objectives: Setting objectives requires
understanding investors’ circumstances,
short- and long-term goals and
personal definition of the word “risk”
as they pursue their investment goals.
It requires a personal connection to
cement the client relationship and
thoroughly understand the individual’s
needs and goals.
Risks: Investors tend to see risk less as a
mathematical concept (such as standard
deviation) than an experience of financial
discomfort or loss. It is also typically
assessed as a single dimension, which
the industry historically has labeled “risk
tolerance.” Advisors can add meaningful
value by understanding the many
forms risk can take, and thoughtfully
incorporating them into the portfolio
construction process.
that each decision made takes clients
closer to their goals. Successful advisors
will meet this challenge by working with
clients to develop a long-term strategy
and construct a portfolio that can deliver
on prescribed objectives over a given
time horizon, while focusing on three key
3
Costs: Ultimately, the advisor’s goal
is to get the best value from each
investment made on behalf of a client.
This requires taking into account both
the fees and taxes, understanding the
nuances of each and budgeting to keep
the portfolio’s total costs in line with
expectations and objectives.
concepts: objectives, risks and costs.
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Delivering your best,
step by step
The portfolio construction process
Through the thousands of portfolios that
1
Benchmark
our Portfolio Consultants have analyzed,
we can share some valuable insights to
2
Budget
help advisors improve their portfolio
construction process and deliver greater
fiduciary value to clients. The typical
3
Invest
portfolio construction process has four
distinct steps — benchmarking, budgeting,
investing and monitoring — which advisors
4
Monitor
should conduct in an ongoing, disciplined,
documented manner.
1
Benchmarking is the critical outcome
of the goal-setting and asset allocation
process. It sets the foundation for the
portfolio, helping to document that
the portfolio remains closely aligned
with client objectives throughout the
investing journey. The benchmark
represents a stable point of reference for
the entire time horizon of the portfolio.
3
The investing step entails determining
the most appropriate vehicles to
implement a client’s strategy. Regardless
of whether the instruments are individual
stocks and bonds, ETFs, mutual funds
or private placements, advisors and
clients will need an unbiased process for
analyzing the available options.
2
Effective budgeting requires decisions
about where to take risks and incur
costs. Having discrete risk and fee
budgets helps advisors to make and
articulate tradeoffs in investment
decisions that are aligned to client
objectives.
4
Monitoring is the ongoing act of
evaluating the portfolio against its
goals, its risk profile and the market
dynamics occurring around it. More than
a fourth step, monitoring permeates the
entire portfolio construction process,
as all steps require regular revisiting
throughout the life of the portfolio.
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INSIGHT
1
Benchmarks troublingly underutilized
We have found that advisors understand
the importance of benchmarks, yet
Benchmarks primarily used
to review performance
underuse them in practice. In our ongoing
surveys of financial advisors, 72% have said
72%
they believe benchmarks are important in
client performance reviews. Yet only 56%
56%
have said they use a benchmark when
In other words, advisors are more likely
to use benchmarks at the end of their
% of advisors
building client portfolios.
process to evaluate performance than
when either designing or making changes
to the portfolio. We think this mismatch
represents a significant opportunity
for advisors to add value. In our view, a
portfolio is much more likely to achieve
its objectives if benchmark insights are
Set benchmarks
before building
Use benchmarks
in reviews
Source: BlackRock Portfolio Solutions advisor survey results
collected from May 2015 to December 2016.
incorporated from the very beginning.
We believe all advisors should be using a
benchmark — ideally, early and often —
We believe all advisors should
be using a benchmark — ideally,
early and often — to manage
client portfolios throughout
to manage client portfolios throughout
the investment process. And importantly,
the benchmark should only change if the
goals/targets/horizon of the portfolio
changes, not as the portfolio itself changes.
the investment process.
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INSIGHT
2
Risk budgets misaligned with actual results
Our work has revealed a disconnect
between benchmark/risk budget
Success relies on prudent
risk budgeting
relationships and portfolios’ actual
results. Many advisors articulated the
challenge this way: Achieve a return similar
to that of the benchmark but with less total
risk. Of these advisors, only 35% of their
portfolios meaningfully achieve that risk/
47%
return goal. Others stated this challenge:
Generate a higher return than their
benchmark but at the same risk level. Here,
65%
nearly half (47%) of these portfolios had
meaningfully higher volatility in the pursuit
of enhanced returns.
This is not to impugn advisors’ good
efforts, but to champion the need for
more sophisticated risk budgeting and
analysis. One contributing factor to these
53%
observations is that many of the products
used in building portfolios today have
become more volatile than the market. This
35%
is partly due to manager decision making,
and partly to the reduction in overall
market volatility. For example, 10 years ago
only 44% of equity funds were riskier than
the S&P 500. The result was roughly the
Same return/
lower risk goal
Higher return/
same risk goal
same 20 years ago. Today, the number is
77% — markedly higher than the historical
precedent. This illustrates the need to align
the portfolio construction process with
Successful
Unsuccessful
Source: BlackRock Portfolio Solutions advisor survey results
collected from May 2015 to December 2016.
the observations and expectations of the
market as it currently exists, and ensure that
return assumptions are properly set and
portfolio risks budgeted wisely.
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More on risk
It’s important to contemplate portfolio risk in two dimensions: How much risk should be taken, and
what types of risk are tolerable in the portfolio. These two questions should be used dynamically in
navigating the investment journey.
First, how much risk can the portfolio afford to take? This is where understanding the client’s
definition of “risk” becomes important. It sounds intuitive, but the challenge is in translating
the client’s risk tolerance to a portfolio that has a high probability of achieving its goal, without
exceeding the level of volatility he or she can withstand. The key here is to match the client’s ability
to consume risk with a portfolio that expresses views of both market returns and risk in the future.
Too often, we see portfolio decision making that expects once-docile asset classes to remain so,
only to have markets change and those assets exhibit unexpected volatility. The behavior of master
limited partnerships (MLPs) in 2015, whose volatility nearly doubled from the three years prior,
provides a good case in point. It illustrates the fact that quantifying how much risk a portfolio will
experience is a complex task, and measuring the risk associated with past returns will not give us
entirely what we need.
Holdings-based analysis, a pillar of BlackRock’s risk-first approach, helps us better understand
the real-time risk profile of the portfolio — based on current holdings instead of past returns. This
technique is designed to complement other returns-based methodologies and help advisors in
two keys ways: 1) to more clearly understand total portfolio risk and 2) to more confidently and
accurately judge portfolios’ ability to align with the investors’ risk tolerances, as they define it.
Second, what types of risk should the portfolio take? At its highest level, this could represent
the choice between stock and bond allocations — comparing equity risk versus credit or interest
rate risk. But just because we call a security a stock or a bond doesn’t mean it is going to act like
one. Sophisticated risk management — with the attention to detail that can help advisors deliver
fiduciary value — goes much deeper than that. More refined decision making can offer both better
diversification and a way to express specific portfolio tilts to capture excess return opportunities.
How these tilts relate to the portfolio’s established benchmark is critical to portfolio construction.
It is dangerous to create such deviations in any portfolio and not understand the implications of
their potential outcomes — both good and bad.
As examples, consider that the effect of interest rate movements on a portfolio is not merely
limited to the bond sleeve, which is commonly the area of focus whenever rates are discussed.
Equity sectors can clearly take noticeably different paths based on how rates are moving as well.
Similarly, the amount of credit risk contained within high yield bonds often causes them to behave
directionally very similarly to stocks, particularly during times of economic stress. The underlying
drivers of return are much more complex than asset classes reveal.
BlackRock has identified over 2,200 unique risk factors, and has a powerful system to measure
them within a portfolio. Decomposing risk with this degree of granularity allows for a clearer
picture of three things: 1) the key drivers of return for the portfolio; 2) the size of the over- or
underweights the portfolio is making versus its benchmark; and 3) the most effective ways to
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diversify the portfolio’s returns, in case those preferences prove to be incorrect for a period of time.
It is not enough to say “bonds will diversify stocks in the portfolio.” The better questions are: “How
much risk comes from each asset class, what types of bonds will diversify the types of stocks I own,
and how much do I need to allocate (and from where)?”
Understanding the size and types of risk is critically important to success, but even that is only
part of the project. Typically, advisors tend to think about risk with an orientation toward returns.
In other words, managing portfolio risk is about owning more of what might be expected to
perform well, and owning little (or none) of what might be expected to produce low or negative
returns. Focusing on the return potential of any single asset doesn’t assist in the management of
risk at the portfolio level. Owning duration during a rising-rate environment is one example. While
it is natural to focus on a longer-duration bond’s probable struggle in a rising-rate environment, it
is also important to consider its merit in another environment — the one that is not expected. In that
scenario, rates could fall, and with them, likely equities too. It’s important to have a buffer in place
to help cushion the portfolio’s downward trajectory in case such a scenario were to come to pass.
Just because we call a security a stock or a bond doesn’t mean
it is going to act like one.
By focusing on the perceived return of the single asset in the environment the investor expects,
the possibility of any other environment occurring is discounted significantly. As such, if and when
a surprise does happen, the portfolio is ill-prepared to deal with it. In this scenario, risk management
within portfolio construction ends up being a constant process that overemphasizes the investor’s
view of the markets, overweighting those investments expected to appreciate, while eliminating
investments expected to underperform. It places a heavy emphasis on the individual being correct
in his or her assertions, and can illustrate the risk in human error. Proper diversification doesn’t work
that way. In reality, there are risks to investing that are outside the control of any investor. There is
also a distinct possibility that any individual’s views could be proven wrong, or at least mistimed.
Being prepared for when bad things happen is a lot more than simply trying to hedge against the
next market downturn. The question is not how do you avoid it? (you likely won’t); but rather, how
do you prepare for it? And perhaps even more importantly, what do you do once it occurs?
Different dimensions of risk help us assess the true potential of how expected market returns,
expected risk, and the client’s demeanor come together to form the portfolio allocation that
provides the best chance for success against the client’s goals. For example, one dimension of risk
involves the markets failing to provide what’s expected of them. If the 10-year expected return for
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a blended portfolio is 5%, and 10 years from now the markets only provided a blended return of
3%, what happens then? Does the client have alternate means to ensure expenses can be met? A
yes or no answer should change the approach to building the portfolio. This dimension doesn’t get
as much attention, but we believe it should.
Additionally, how does the client’s perception of risk change during the investing journey? In volatile
times, investors tend to grow more risk averse, regardless of their required returns. The opposite
is also true: In more docile times, investors’ behaviors tend to be less risk averse. This shifting risk
temperament creates challenges in managing the journey with any client, and can lead to significant
diversions away from the long-term plan. As such, it represents another dimension of risk that we
believe isn’t as well diagnosed nor treated in the private wealth management industry today.
In summary, proper preparation for the many dimensions of risk in portfolio construction
should consider:
••
the potential for an event to occur
••
the probability of the event occurring
••
the impact of the event, should it occur
All dimensions of risk should be considered against these three elements. Properly planning for
them can create meaningful changes to the portfolio construction process. Failing to address any of
these risk dimensions could have important implications for the investors, potentially requiring an
unintended and undesirable change in spending habits or lengthening in the investment time horizon.
A word on cost
Portfolio costs come in two categories: fees
(transaction costs or management fees) and
taxes. Each of these eat into the returns a
portfolio generates, and in times when capital
market assumptions suggest low returns, the
impact of this drag is intensified. Advisors that
build a documented cost budget into their
portfolio construction process, similar to their
risk budget, can ensure they are incurring costs
only when justified.
Being wise with the cost budget provides a
plan to save money where investment choices
offer little to no differentiation, and allows a
means to reasonably pay more for manager
skill, high conviction, or strategies designed
to achieve a specific client objective that have
clear mandates and measures of success. Core
investments, or the building blocks for broad
allocations within a portfolio, should be used
to offer the return of an index at the lowest
possible cost. And as more innovations in
product design offer greater access to parts
of the investment value chain at lower costs,
this will put even greater pressure on the
higher end of the cost spectrum. There are
good reasons to pay higher fees, but advisors
must ensure they — and their clients — are truly
getting value for that cost.
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INSIGHT
3
Correlations make it harder to lower risk, even in alts
We have recently seen advisors struggle
markets is the only game in town. Many
when using alternative investments. 83%
managers, even those working to create
of the advisors we spoke to said they
idiosyncratic returns, have been forced to
use alternative investments primarily to
align their portfolios more with the U.S.
reduce risk in their clients’ portfolios,
equity rally, driving their correlations with
since these strategies tend to have lower
other asset classes up, and their ability to
correlation to equities. Over the past three
diversify down.
years, however, the correlation between
commonly available alternative investments
Advisors looking to these fund categories
and equity markets has risen dramatically,
for diversification have learned a valuable
with multi-alternative funds and long/short
lesson about the importance of due
equity funds having correlations of 0.63
diligence. A thorough evaluation using
and 0.69 to the S&P 500, respectively.
the due diligence process we recommend
— particularly reviewing performance
This is due primarily to the equity bias
qualities — would have identified alternative
that has prevailed in the markets; the S&P
managers that weren’t as likely to deliver
500 has tripled during the eight-year time
the diversification desired, and could have
period following the 2008 crisis, making
helped advisors position client portfolios in
it feel like being long in the U.S. equity
a more disciplined, fiduciary capacity.
This example highlights that in the
Advisors’ views on the
role of alternatives
investment selection step of the portfolio
construction process, quality research,
analysis and in-depth knowledge of
any specific fund being considered for
the portfolio is essential. The advisor’s
83%
Reduce
risk
17%
Enhance
return
ultimate goal should be to understand
three things about each investment
under consideration: 1) how it fits into the
client’s portfolio; 2) what could cause it
to gain or lose value; and 3) how it aligns
with the overall investment strategy and
client objectives.
Source: BlackRock Portfolio Solutions advisor survey results
collected from May 2015 to December 2016.
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Due diligence is more important than ever
Researching and choosing from the ever-growing number of options in the market, as well as the
increasingly complex strategies available, can consume a lot of time and sometimes create confusion.
Many advisors begin their portfolio construction process at the Invest step and have not established a
rigorous process for documenting each investment selection they make. This exacerbates the risks they
may be taking, both for their business and their clients.
Our Due Diligence team, which works with some of the world’s largest institutions, foundations and
individual investors globally, suggests the below broad categories of examination when assessing
ETFs and mutual funds. Examining a fund extends well beyond pulling up its rating and reading an
analyst report. In a fiduciary world, it’s critical to devote the necessary time to this step in the portfolio
construction process, or find ways to outsource it to a party capable of conducting the necessary,
ongoing research. The old rules of thumb used by many investors as “proper due diligence” will be
increasingly hard to defend.
ETF due diligence highlights
Costs: In addition to expense ratios, make sure
to consider implicit costs, including trading,
market impact and rebalancing, to determine
the true total cost of owning the product
Exposure: Whether you seek a targeted or
broad market exposure, make sure the ETF you
choose allows you to express your view without
introducing additional risk or market factors.
Liquidity: You don’t know you need liquidity
until it’s gone. Examine your ability to trade in or
out of the security. The liquidity of an ETF should
be evaluated both through measuring its market
volume as well as the liquidity of the underlying
securities. If the underlyings are highly liquid,
even an ETF with low daily volume can handle
large trades fairly easily.
Provider: Feel confident in the provider’s
size, scale, expertise, track record and level of
commitment to the ETF industry.
Structure: Ensure that the ETF is structured
to provide transparency to your clients while
also minimizing unintended risks or costs (i.e.,
tracking error or tax-inefficiency, for example).
Mutual fund due diligence highlights
Manager: Research the portfolio managers
and their broader team, including the team’s
structure, each member’s responsibilities, their
backgrounds and other funds they manage.
Performance: Know the benchmark the fund
measures itself against and how both the fund
and the benchmark have performed across a
variety of market environments (in terms of both
risk and return). If there were any significant
differences between the two — good or bad —
gather additional information to comprehend
and gain comfort as to why. Remember, tilts that
produced positive results in the past can also
produce negative results in the future.
Philosophy: Find out how the portfolio
manager views the markets and how that
translates into the fund’s investment strategy.
Every fund has a part of the market cycle it is
likely to thrive in, as well as time where it more
likely will struggle as a result of its philosophy.
Be sure you understand what both of those
environments look like.
Process: Understand how the team executes
its strategy and how they make decisions. The
process should clearly identify how the fund’s
manager selects securities as well as how they
monitor risk on a daily basis.
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INSIGHT
4
Portfolios are running high on risk
Maintaining a risk-balanced portfolio
in today’s markets is complicated. Our
Most portfolios exhibit higher risk
than broad benchmarks
research shows many portfolios are built
based on market trends and best ideas.
However, when working with advisors, we
find that many portfolios have imbalanced
risks that increase the likelihood of
drawdowns in periods of market stress.
When analyzing our portfolio database,
we divided all models into three cohorts,
68%
82%
87%
Aggressive
Moderate
Conservative
labeling them “conservative,” “moderate”
and “aggressive.” We found that in the
aggressive cohort, 68% of the portfolios
hold more risk than their benchmarks. One
might expect this phenomenon to abate
in the less aggressive cohorts. In fact, the
opposite is true. Within the moderate
cohort, 82% of the portfolios were riskier
than their benchmarks, and that number
grew to 87% within conservative portfolios.
Source: BlackRock Portfolio Solutions advisor survey results
collected from May 2015 to December 2016.
We feel it is critical to understand how the
stock and bond components of a portfolio
work together and react to different market
Many portfolios have imbalanced
risks that increase the likelihood
of drawdowns in periods of
market stress.
events. For instance, core bonds and
municipals can be effective diversifiers
when equity markets draw down, providing
stability in a portfolio. Flexible bond
strategies, meanwhile, offer the potential
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to protect a portfolio from interest rate
and experiences to consult on thousands
volatility. Of course, equities also tend to
of portfolios each year. BlackRock Portfolio
do well when rates rise, suggesting that
Solutions seeks to meet clients where
diversification of that specific risk factor
they are, using a long-term strategic
could come from the equity portion of the
and risk-managed approach to portfolio
portfolio as well.
construction, while recognizing the journey
matters as much as the horizon. As such,
Portfolios should evolve as the
while offering insights of its own, the team
circumstances around them change.
also seeks to co-develop solutions with
Through disciplined monitoring and
advisors that focus on achieving long-
measuring of a portfolio against its
term client goals with attention to journey
benchmark, mismatches can be identified
management, and a bias toward building a
and remedied. Particularly, regularly
disciplined and repeatable process.
running a portfolio through a stress test
can reveal scenarios that might elicit a
The team works as one portion of a large
dramatic response, helping advisors
component of the firm dedicated to
ensure portfolios are prepared for a variety
fiduciary services and risk management for
of market events. Stress testing can also
clients of all types. Combined, there are
help an advisor handle the client’s human
thousands of BlackRock employees stacked
propensity to change risk temperament as
against these endeavors alone. Our
market volatility changes. In other words,
proprietary risk platform, Aladdin®, is at the
if managing against a large drawdown
cutting edge of financial industry insights
is the key to keeping the client invested
and technology, and sits at the heart of
at a stressful moment in the markets,
everything we do. Aladdin helps us ensure
building the portfolio with an intentional
that the risks our clients take are deliberate,
awareness of how it would behave against
diversified and appropriately scaled.
a feared stressor may be the key to keeping
the portfolio invested, and the client’s
While Aladdin has traditionally been used
investment plan on track.
by institutions, governments, central banks
and even some of BlackRock’s competitors,
BlackRock’s
expert team
we have made significant investments to
bring the power of our platform to advisors
and their clients. We can distill portfolios
down to their common risk factors —
The BlackRock Portfolio Solutions team
measuring the size of known risk factors,
has over 20 dedicated consultants, most
as well as identifying other risk factors that
CFA charterholders, who work directly with
advisors might not realize are present, to
individual advisors serving U.S. private
help build better portfolios.
clients. Team members have held roles in
portfolio management, model construction
and risk management, using these skills
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Risk. Though it comes in many forms, implementing
a disciplined portfolio construction process can give
Conclusion
advisors the confidence to address risk head-on and to
deliver the fiduciary value investors expect. However
they decide to proceed, advisors will need the right
tools, technology, resources, products, and most
importantly insights, to embrace this evolving industry.
Objectives, risks and costs will continue to define how advisors serve their
clients. Whether they do it themselves, in concert with a partner, or outsource
as little or much of it as they like, how well advisors perform the four core steps
of the portfolio construction process — benchmarking, budgeting, investing
and monitoring — will determine how well they serve those clients.
BlackRock is here to help. Advisors can combine our services and
comprehensive suite of solutions with their expertise in any way they wish to
reinforce investment objectives, portfolio building and close relationships with
investors. We can provide ready-built portfolios, help adjust firm models to
meet client needs, or provide the tools for advisors to build or enhance their
own proprietary models.
Crucially, through the in-depth work we do with advisors’ portfolios every
day, we believe we can see trends that others miss. Portfolio construction is
more complex than ever, and staying close to the insights we are constantly
uncovering can help advisors build better portfolios and improve the
probability of making good on their pledge to clients — helping investors reach
their investment goals.
To learn more, visit the BlackRock Portfolio Solutions website at
blackrock.com/portfoliosolutions.
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Why BlackRock
BlackRock helps people around the world, as well as the world’s largest institutions and governments,
pursue their investing goals. We offer:
•• A comprehensive set of innovative solutions, including mutual funds, separately managed accounts,
alternatives and iShares® ETFs
•• Global market and investment insights
•• Sophisticated risk and portfolio analytics
We work only for our clients, who have entrusted us with managing $5.14 trillion,* earning BlackRock the
distinction of being trusted to manage more money than any other investment firm in the world.
Want to know more?
blackrock.com/portfoliosolutions * AUM as of 12/31/16.
Investing involves risk, including possible loss of principal. Asset allocation strategies do not assure profits or
protect against loss. International investing involves risks, including risks related to foreign currency, limited liquidity,
less government regulation and the possibility of substantial volatility due to adverse political, economic or other
developments. These risks are magnified for investments in emerging or smaller capital markets. Investing in
alternative investments presents the opportunity for significant losses, including the possible loss of your total
investment. Such strategies have the potential for heightened volatility and in general, are not suitable for all
investors.
For a current prospectus or, if available, a summary prospectus of any BlackRock mutual fund, which contains
more complete information, please call your financial professional or BlackRock at 800-882-0052. Before investing,
consider the investment objectives, risks, charges and expenses of the fund(s) under consideration. This and other
information can be found in each fund’s prospectus or, if available, summary prospectus. Read each prospectus
carefully before you invest.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities
or to adopt any investment strategy. The opinions expressed are those of the investment professional(s) profiled as of April 2017, and may change as subsequent
conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that may, in certain respects, not be consistent with
the information contained in this report. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by
BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee
that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. The fund is actively
managed, and its holdings and portfolio characteristics are subject to change.
©2017 BlackRock, Inc. All Rights Reserved. BLACKROCK, iSHARES and ALADDIN are registered trademarks of BlackRock, Inc. or its subsidiaries in the United States
and elsewhere. All other trademarks are those of their respective owners.
Prepared by BlackRock Investments, LLC, member FINRA.
Not FDIC Insured • May Lose Value • No Bank Guarantee
Lit. No. PS-INSIGHT-0417
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