In this article we discuss the opportunities that exist in the current market backdrop, and perhaps more importantly, the inherent risks.
In today’s environment we are finding that many clients have many questions about the opportunities that exist, and perhaps more importantly, the inherent risks.
Taking a look at the current macroeconomic backdrop, investors are facing what looks to be a period of low expected returns with increased volatility and dispersion. A number of central banks have implemented policies characterised by negative interest rates, driving government bond yields to all-time lows. Within equities, earnings and dividend growth are also relatively low. Clearly a key question from investors is how do I navigate such a challenging backdrop?
We believe it is important to highlight that an environment characterised by dispersion of returns also provides significant opportunities for investors. An active approach is built to navigate the intricacies of the global markets, thriving best when returns are dispersed and potentially volatile. This involves selecting opportunities that offer a favourable long-term risk-return profile, while avoiding those that appear too risky. A good example is the use of currency hedging; this allows investors to actively choose to remove the currency risk from their portfolio if they believe the risk is too high. Another may be the choice to implement minimum volatility equity exposure in a period of heightened volatility, allowing an investor to remain exposed to equities with a lower level of overall volatility, whether this is at the global or regional level.
The BlackRock Managed Index Portfolios seek to navigate the risky backdrop by adopting an active approach that considers investing from three perspectives: risk, return and cost. The funds offer investors the ability to access the insights of the Multi-Asset team, implemented in a low-cost approach that leverages the wide variety of Beta exposures offered by BlackRock. Please click here to learn more about our approach to building portfolios in a volatile world.
To find out more about the BlackRock Managed Index Portfolios (BMIPs) please visit our website or contact us.
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