BlackRock have positioned the portfolio in anticipation of positive performance from risky assets, given their increasingly bullish economic outlook emerging from the coronavirus crisis.
The new allocation is mindful of the negative effects of rising inflation and interest rates. In line with this, BlackRock have increased the overall equity exposure. This was funded by a decrease in their Fixed Income exposure and a larger decrease in their Gold position.
| STRATEGY COMPONENT | WEIGHT | INVESTMENT STYLE |
| Alternative | 3.50% | |
| Gold | 2.50% | Physical ETF |
| Property | 1.00% | Physical ETF |
| Equity | 81.30% | |
| Pacific (ex Japan) Reg Equities | 0.50% | Physical ETF |
| Canada | 0.75% | Physical ETF |
| Emerging Market Equities | 10.40% | Physical ETF |
| Eurozone Equities | 11.30% | Physical ETF |
| Japan Equities | 4.25% | Physical ETF |
| UK Equities | 5.95% | Physical ETF |
| US Equities | 44.60% | Physical ETF |
| Fixed Income | 15.00% | |
| Emerging Markets Corporate USD | 0.75% | Physical ETF |
| Index Linked Gilts | 3.50% | Physical ETF |
| TIPS | 1.75% | Physical ETF |
| 20+y Treasuries | 3.00% | Physical ETF |
| U.S Corporate High Yield | 0.51% | Physical ETF |
| U.S | 2.50% | Physical ETF |
| U.S Corporate Rate Hedged | 2.00% | Physical ETF |
| 100% |
Equity
Equity exposure through MSCI ACWI has been introduced to ensure the portfolio has exposure to more of the minor markets including developed markets, that are otherwise not covered like South Korea and Israel. BlackRock have further included Canada specifically in asset allocation.
BlackRock have increased emerging markets (which includes China) exposure significantly in response to the positive cyclical outlook.
Receding risks from Brexit and a rapid implementation of vaccinations has boosted the outlook for UK equities and BlackRock have adjusted the position accordingly.
BlackRock have reduced the overweight US position. Pacific Ex-Japan and Japan have also, been reduced, primarily to fund additional exposure to other markets. Our Eurozone exposure was increased minorly.
Equity Portfolio Changes
Fixed Income
The fixed income sleeve allocation is positioned to weather rising inflation and interest rates while providing an important element of diversification to the portfolio.
BlackRock have reduced the 20+ year Treasury’s, to 3% but have retained this because they view it as the most effective diversifier.
BlackRock have eliminated the 7–10-year Treasury positions. For this maturity range in government bonds, the portfolio only holds inflation linked securities. Exposure to inflation linked gilts have been reduced to fund a 0-5yr TIPS position which has low duration and offers inflation protection.
BlackRock have added investment grade U.S. bonds and have removed the MBS position. The interest rate hedged potion has been reduced taking profits. They have also increased both US High Yield and EM corporate, to benefit from the high relative yield of these assets, and in anticipation of reduced defaults and lower credit spreads.
Fixed Income Portfolio Changes
Alternatives
BlackRock have reduced the allocation to gold to 2.5%. Gold does not produce cashflows and so loses its relative appeal as rates rise, however, it remains a strong hedge against inflation, and provides an element of protection in a future risk off environment. They have increased our exposure to property, which is excepted to benefit strongly from economic reopening.
Alternatives Portfolio Changes
Asset Allocation
Portfolio Changes
| Weights (Exposures) | NAME | 08/03/2021 | 27/01/2021 | Change |
| Alt: Gold | ISHARES PHYSICAL GOLD ETC | 2.50% | 4.00% | -1.50% |
| Alt: Property | ISH DVL MKT PRPTY YLD USD A | 1.00% | 0.50% | 0.50% |
| EQ: Pacific Region ex Japan | ISHARES CORE MSCI PACIF X-JP | 0.50% | 1.90% | -1.35% |
| EQ: Canada | ISHARES MSCI CANADA ACC | 0.75% | 0.00% | 0.75% |
| EQ: E.M. | ISHARES CORE EM IMI ACC | 10.40% | 8.00% | 2.40% |
| EQ: Eurozone | ISHARES MSCI EMU USD-H ACC | 11.30% | 11.10% | 0.25% |
| EQ: Global | ISHARES MSCI ACWI | 3.75% | 0.00% | 3.75% |
| EQ: Japan | ISHARES CORE MSCI JAPAN | 4.25% | 6.20% | -1.95% |
| EQ: U.K. | ISHARES CORE FTSE 100 ACC | 5.95% | 5.30% | 0.70% |
| EQ: U.S. | ISHARES CORE S&P 500 | 18.00% | 18.00% | 0.00% |
| EQ: U.S. | ISHARES MSCI USA USD ACC | 18.00% | 18% | 0.00% |
| EQ: U.S. | ISH MSCI USA ESG EHNCD USD-D | 8.60% | 11.90% | -3.30% |
| FI: E.M. Corporate USD | ISHARES JPM USD EM CRP USD A | 0.75% | 0.30% | 0.45% |
| FI: Index Linked Gilts | ISHARES GBP INDEX-LNK GILTS | 3.50% | 4.00% | -0.50% |
| FI: TIPS | ISHARES USD TIPS | 1.75% | 2.00% | -0.25% |
| FI: TIPS 0-5 yr | ISHARES USD TIPS 0-5 | 1.50% | 0.00% | 1.50% |
| FI: Treasury 7-10 yr | ISHARES USD TREASURY 7-10Y | 0.00% | 1.20% | -1.20% |
| FI: Treasury > 20 yr | ISH USD TRES 20PLUS YR USD A | 3.00% | 5.00% | -2.00% |
| FI: U.S. | ISHARES US AGG BND USD ACC | 2.50% | 0.00% | 2.50% |
| FI: U.S. Corporate High Yield | ISHARES USD HY CORP USD ACC | 2.00% | 0.50% | 1.50% |
| FI: U.S. Corporate Rate Hedged | ISH USD CORP INT HDG - USD A | 0.00% | 1.80% | -1.80% |
| FI: U.S. MBS | ISHARES US MBS USD ACC | 0.00% | 0.50% | -0.45% |
Download: 1OAK MA80 March Rebalance Report