Market Advantage

SYSTEMATIC

BlackRock Systematic’s Market Advantage strategy strives to provide returns with resilience by targeting equity-like returns with lower risk and shallower drawdowns.

Why BlackRock for Market Advantage?

Diversification and Risk management cannot fully eliminate the risk of investment loss. Diversification and asset allocation may not fully protect you from market risk. While the investment approach described herein seeks to control risk, and proprietary technology platforms may help manage risk, risk cannot be eliminated.

Diversifies differently

Differentiated factor-based approach looks through asset classes to the key drivers of risk and return, seeking to maximize diversification and benefit from many sources of return.

Extensive track record

Over 35 years of investing systematically, including more than 15 years in risk parity strategies.

Emphasis on managing downside risk

Ongoing dynamic risk management seeks to protect capital during extreme market environments, supported by proprietary risk analytics.

Broad, liquid exposure

Exposures are implemented with liquid and cost-effective instruments traded in deep, public markets.

Investment Philosophy

Our research indicates that asset classes are driven by six macroeconomic factors: economic growth, credit, emerging markets, liquidity, real rates, and inflation. In our view, these fundamental macro factors offer more precision and clarity regarding the drivers of asset class returns and their co-movements.¹

By combining return engines or macro factors into a truly diversified portfolio, Market Advantage seeks to reduce total portfolio risk without sacrificing returns. Market Advantage is not asset class-dependent - it is diversified across geographies, asset classes and factors. This diversification across factors may produce more stable performance, offering clients access to potentially more consistent return streams. Our mission is to help our investors achieve the expected returns they need at reasonable levels of risk across different market environments.

How we identify macro factors

How BlackRock Systematic identifies macro factors

Source: BlackRock Principal Components Analysis as of 31 March 2024. There can be no assurance that performance will be enhanced or risk will be reduced for funds that seek to provide exposure to certain quantitative investment characteristics ("factors"). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a fund may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could result in losses.

The fundamental macro factors identified have the following characteristics ²:

They can explain the majority of the asset class returns.
They have positive expected returns over the long-term.
They are intuitive.

Investment process

Our team follows a systematic investment process. We leverage the power of data and technology to evaluate hundreds of securities on a daily basis. Every investment decision is evaluated by the portfolio management team to ensure it is sensible and consistent with our research.

The investment strategies included in Market Advantage are the result of over 15 years of research into macroeconomic factors and behavioral finance. While the strategy is designed to be long-term and steady in nature, we recognize that markets are dynamic; as such, we emphasize the importance of continuous, evolutionary research to adapt the strategy in striving to succeed going forward. We continuously research the best ways to define these macro factors, allocate risk, and implement the portfolio.

The strategic portfolio allocations are based on long-run economic priors and a desire for a well-diversified and balanced allocation across macro factors. We do not adhere to a calendar rebalance, instead, we rebalance the portfolio when the benefits of rebalancing exceed the expected transaction costs.