Systematic Investing

By combining the power of big data, data science, and deep human expertise to modernize the way we invest, systematic investing is unlocking new ways to seek consistent portfolio outcomes amidst a world of unpredictability.

What Is Systematic Investing?

In today’s uncertain markets, we all need more targeted investment outcomes.

By combining the power of data-driven insights, investment science, and disciplined portfolio construction to modernize the way we invest, systematic investing is unlocking new ways to seek specific outcomes amidst a world of unpredictability.

Systematic investing begins with data-driven insights.

In the digital age, we have access to vast amounts of data, from traditional sources like company financial statements and economic reports to more complex unstructured sources like company news stories, web traffic, social media sentiment, consumer geo-location data and even satellite imagery.

By harnessing highly sophisticated analytics techniques like machine learning and artificial intelligence, we transform this sea of raw data into useful investment information—providing insights faster, at greater scale, and with more granularity than traditional methods.

Next, we deploy rigorous scientific testing to learn if these investment insights actually have the potential to help forecast future returns.

This process includes a comprehensive examination of empirical evidence by seasoned investment experts—testing different combinations of variables and comparing the results to known outcomes. This ability to validate insights means portfolio decisions are firmly evidence-based on not dependent on human conviction alone.

Finally, when an insight is shown to be valuable, we employ a disciplined portfolio construction process to implement it. Our investment experts use computers to model the many complex trade-offs involved—finding a balance between expected return, risk, correlation, and cost—to guide any allocation decisions.

At every step, the systematic process is designed to help deliver more targeted investment outcomes.

Whether it’s seeking risk-managed growth through equities… generating income and maintaining ballast with bonds… or accessing new sources of diversification and return with alternative strategies…

Systematic investing is unlocking new ways to navigate a world of uncertainty.

What is systematic investing?

Systematic investing, often called quantitative investing, is an investment approach that emphasizes data-driven insights, scientific testing of investment ideas, and advanced computer modelling techniques to construct portfolios.

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Investing, evolved

BlackRock Systematic, as of June 2024. For illustrative purposes only.

BlackRock Systematic, as of 06/30/2024. For illustrative purposes only.

Human X Machine

Innovative investment insights are validated through rigorous quantitative testing—amplifying the decision-making of our investment experts.

Engineered for scale

Technology-driven process helps scale investment insights across vast sets of securities, enabling high-breadth portfolios for equities, fixed income, and alternatives.

Targeted outcomes

Systematic tools help our investors balance complex risk and return trade-offs with precision—targeting the investment outcomes that you expect.

The future of investing requires modern technology and portfolio construction to deliver consistent returns at a reasonable cost.

Raffaele Savi

Head of Systematic Investing

Systematic Chart of the Month

The pace of cooling in the US economy has raised concerns that the Fed is falling behind the curve, potentially warranting a more aggressive reduction in interest rates with a 50bp initial cut this month. We analyzed past rate cutting cycles to better understand what this move could mean for equity investors:

What could an initial 50bp cut signal to investors? Historically, a 50bp first cut has proven twice as likely to precede a recession over the next year versus a 25bp cut. This larger move could signal the Fed’s expectation for a more rapid deterioration in the labor market and economy.
What could this mean for equity markets? The chart above highlights returns to equity baskets associated with ‘hard landing’ versus ‘soft landing’ macro regime scenarios in past cutting cycles. The relative strength of the hard landing basket in cycles starting with a cut of 50bp or more contrasts with a lack of clear regime leadership observed with a smaller initial cut. The key takeaway for investors: if the Fed cuts 50bp, return dynamics are likely to reflect growing recession fears.

Explore systematic strategies

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To obtain more information on the funds, including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month-end, please visit:

Systematic Multi-Strategy Fund
Global Equity Market Neutral

The Morningstar Rating^TM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com.

Build better bond portfolios

BlackRock’s Advantage Series bond fund seeks a combination of income and capital growth through an investment process that validates fundamentally-oriented insights with quantitative research. Our factor-based bond funds use time-tested factor insights to seek superior risk-adjusted and total return

Tab 1

To obtain more information on the funds, including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month-end, please visit:

CoreAlpha Bond Fund
iShares Investment Grade Bond Factor ETF
iShares High Yield Bond Factor ETF
iShares Fallen Angels USD Bond ETF

The Morningstar Rating^TM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com.

Seek risk-managed growth at a low cost

Managed through a technologically-driven investment process, the BlackRock Advantage Series of equity mutual funds can help seek risk-managed growth at a low cost.

On-screen question: How do you maintain an alpha edge in markets?

Simply put, deep human expertise and cutting-edge technology.

We live in an increasingly digital world. When you look at all the data available, 90% of it has been generated over the last two years. [Source: Dihuni, data as of April 10 2020]

This is everything from wi-fi beacons to credit card purchases, to online activities.

While a single data point might not be interesting, in aggregate, it starts to tell a story.

We utilize diverse market expertise and data-driven investment process to separate potentially valuable signals from the noise. This leads to potentially innovative insights that seek to forecast trends and help make active moves ahead of the pack.

On-screen question: How do you maintain an alpha edge in markets?

Simply put, deep human expertise and cutting-edge technology.

We live in an increasingly digital world. When you look at all the data available, 90% of it has been generated over the last two years. [Source: Dihuni, data as of April 10 2020]

This is everything from wi-fi beacons to credit card purchases, to online activities.

While a single data point might not be interesting, in aggregate, it starts to tell a story.

We utilize diverse market expertise and data-driven investment process to separate potentially valuable signals from the noise. This leads to potentially innovative insights that seek to forecast trends and help make active moves ahead of the pack.

To obtain more information on the funds, including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month-end, please visit:

Advantage Large Cap Core Fund
Advantage Small Cap Core Fund
Advantage International Fund

The Morningstar Rating^TM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com.

Investing involves risk, including possible loss of principal. An investment’s environmental, social and governance (“ESG”) strategy limits the types and number of investment opportunities available and, as a result, may underperform other investments that do not have an ESG focus. An investment’s ESG strategy may result in investing in securities or industry sectors that underperform the market as a whole or underperform other investments screened for ESG standards.

To obtain more information on the funds, including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month-end, please visit:

Sustainable Advantage Large Cap Core Fund
Sustainable Advantage CoreAlpha Bond Fund

The Morningstar Rating^TM for funds, or "star rating," is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.iShares.com or www.blackrock.com.

Seeking outcomes with active ETFs

Our systematic ETFs are designed to target thematic positioning and target specific exposures to deliver more precise outcomes. Through systematic stock selection and option-based strategies, we can better capture the exposures clients seek and effectively balance the tradeoffs between risk and return.

Raffaele Savi

Global Head of BlackRock Systematic and Co-CIO and Co-Head of Systematic Active Equity]

After a decade of near zero interest rates, investors are rethinking the tradeoffs between generating income and investing for long-term growth. BlackRock Systematic has developed a combination of stock selection strategies and option-based strategies that optimize this very tradeoff.

[on screen: BlackRock Advantage Large Cap Income ETF]

The BlackRock Advantage Large Cap Income ETF (aka BALI) provides investors with choices, aligning long-term goals with the dual aim of income generation and market participation. BALI seeks to enhance income through dividends, manages equity risk for downside resiliency and provides exposure to a defensive equity portfolio for continued potential market growth.

[on screen: “Why BALI?”]”]

[split screen and show the list of benefits as the narrator speaks about them. “Enhanced income”]

BALI targets enhanced income by deploying a dividend rotation strategy in combination with an option writing premium strategy. The fund invests in U.S. large cap stocks, while writing call options on the S&P 500 Index in an attempt to deliver a consistent monthly dividend.

[on screen: “Market participation”]

The fund’s active stock selection seeks to capture large cap equity growth, while focusing on quality to help mitigate downside risk in the portfolio. BALI is managed by the BlackRock Systematic equity team, which seeks to uncover insights faster, at greater scale, and with more precision using data and machine learning.

[on screen: “Experienced team”]

The team has managed systematic portfolios for over 35 years and has over a decade of experience managing global equity income strategies. BlackRock Systematic manages over $5B in dedicated equity income strategies and our broader systematic platform is comprised of over $223B of assets under management from clients around the entire world.

To learn more about how BALI can help investors like you navigate the current market environment, please visit BlackRock.com/BALI.

[Closing music]

Disclosures

Real yield historical data provided by Bloomberg, as of August 31, 2023.

The BlackRock Systematic team data is provided by BlackRock as of August 31, 2023.

Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds’ prospectuses, or, if available the summary prospectus, which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

The Fund is actively managed and does not seek to replicate the performance of a specified index. The Fund may have a higher portfolio turnover than funds that seek to replicate the performance of an index. When the Fund sells call options on a large cap equity index, it receives a premium but it takes on the risk that these options may reduce any profit from increases in the market value of the long equity positions held by the Fund. Any such reduction in profits would be the difference between the payoff of the call option and the premium received. The Fund would also retain the risk of loss if the long equity positions decline in value. The premiums received from the options may not be sufficient to offset any losses sustained from the long equity positions. Factors that may influence the value of the options generally include the underlying asset’s price, interest rates, dividends, the actual and implied volatility levels of the underlying asset’s price, and the remaining time until the options expire, among others. The value of the options written by the Fund typically do not increase or decrease at the same rate as the underlying asset’s price on a day-today basis due to these factors.

A fund's use of derivatives may reduce a fund's returns and/or increase volatility and subject the fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. A fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There is no guarantee that any fund will pay dividends.

There can be no assurance that any fund’s hedging transactions will be effective. This material is provided for educational purposes only and is not intended to constitute investment advice or an investment recommendation within the meaning of federal, state or local law. You are solely responsible for evaluating and acting upon the education and information contained in this material. BlackRock will not be liable for direct or incidental loss resulting from applying any of the information obtained from these materials or from any other source mentioned. BlackRock does not render any legal, tax or accounting advice and the education and information contained in this material should not be construed as such. Please consult with a qualified professional for these types of advice.

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