BlackRock Model Portfolios

Hi, I’m Uwe Helmes - lead strategist for the Model Portfolio Solutions business in Australia.

March is an exciting month as it marks the 11-year anniversary of the Enhanced Strategic Model Portfolios and the completion of our annual SAA review, which is a major project for the team each year.

The portfolios were rebalanced on the 5th of March to reflect BlackRock’s updated strategic asset allocation and latest tactical views.

Before I talk about the portfolio changes, I want to highlight some of the key market dynamics, performance drivers and unique features of the current environment.

Despite ongoing geopolitical events, most sharemarkets are up over 10% since early last year and remain close to all-time highs. Overall index volatility is fairly contained, despite all the noise, but there is a lot happening underneath the hood.

We’re seeing sharp market swings and significant rotations within and across markets. For example, we’ve witnessed a meaningful rotation away from prior winners such as large tech and software companies towards more value-oriented companies and cyclical exposures such as Materials, Energy and Infrastructure.

The recent selloff across software companies marks a dramatic shift in the AI narrative. A few months ago, the market debated whether AI was real. Today, AI is seen as an active threat to some business models and the focus has shifted to which industry could face disruption from AI.

We believe the hunt to sort the winners from the losers is going to continue and requires a nimble, risk-aware approach to portfolio construction.

Related to this, we are seeing record-breaking levels of single stock volatility. About one third of S&P 500 stocks have fluctuated by more than 20% over the last three months, which is unusually high.

This elevated single-stock dispersion comes at a time when the overall index remains close to an all-time high.

The environment has been tricky to navigate and many active stock pickers have significantly underperformed their benchmarks.

I am pleased to announce that the performance of the Enhanced Strategic managed portfolios remains extremely strong.

Virtually all risk profiles of the Enhanced Strategic portfolios achieve 1st or 2nd quartile performance over 1, 3, 5, 7 and 10 years as per the Morningstar Peer rankings.

We’re proud of this achievement yet believe we need to continuously evolve and get better, in order to capture the latest market opportunities and continue to deliver returns for our clients.

On this point of evolution and being market-aware, we recently completed the annual SAA review, which incorporates BlackRock’s latest capital market assumptions across asset classes and regions.

We also updated our tactical views, which capture shorter-term investment signals.

Here is a summary of the key trades implemented on the 5th of March 2026:

Firstly, we think investors should be rewarded for staying invested and expect positive returns across asset classes, especially over the long-run. However, we expect differences across regions, sectors and styles.

Within equities, we continue to prefer international equities over domestic stocks. Notably, we increase the allocation to Japanese equities amid sustained corporate reforms and tailwinds from government stimulus. We also like the higher exposure to the Japanese Yen, which adds to portfolio diversification.

Similarly, we increase the allocation to European equities, while realising some gains on recent winners such as Emerging market equities.

We also adjust the way we gain US equity exposure. As mentioned earlier, single-stock dispersion is elevated and the market is focusing on sectors other than the Magnificent 7.

We believe this development warrants looking beyond a standard market-cap weighted index exposure, especially in the US, as the S&P500 index has become quite concentrated over recent years.

As a result, we add a dedicated allocation to a dynamic factor-rotation strategy within US equities to better capture the current market opportunities.

Additionally, we prefer hedged over unhedged US equities and introduce a modest tilt towards US small-caps in the portfolio.

We continue to like gold and listed infrastructure as portfolio diversifiers.

Finally, within fixed income we reduce the allocation to Australian nominal bonds in favour of cash.

Within credit, we add to higher-quality Australian investment grade securities, while reducing exposure to Global High Yield Debt.

Thanks for watching.