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New risks. New insights. Portfolio construction ideas and eye-openers BL ACK ROCK PORTFOLIO SOLUTIONS 20170424-144971-392628 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. 2 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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. P O RT F O L I O CO NST R U CT IO N 3 20170424-144971-392628 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. 4 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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. P O RT F O L I O CO NST R U CT IO N 5 20170424-144971-392628 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. 6 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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. P O RT F O L I O CO NST R U CT IO N 7 20170424-144971-392628 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 8 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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 P O RT F O L I O CO NST R U CT IO N 9 20170424-144971-392628 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. 10 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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. P O RT F O L I O CO NST R U CT IO N 11 20170424-144971-392628 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. 12 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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 P O RT F O L I O CO NST R U CT IO N 13 20170424-144971-392628 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 14 N EW RISKS. NE W IN S IG H T S . 20170424-144971-392628 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. P O RT F O L I O CO NST R U CT IO N 15 20170424-144971-392628 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 008467A-US4-0417 20170424-144971-392628